OI CORP - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934

For the fiscal year ended: December 31, 2002
-----------------

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission file number: 0-6511
------

O. I. CORPORATION
(Exact name of registrant as specified in its charter)

OKLAHOMA 73-0728053
(State of Incorporation) (IRS Employer Identification No.)

151 GRAHAM ROAD, BOX 9010
COLLEGE STATION, TEXAS 77842-9010
(Address of principal executive offices) (Zip Code)

Registrant's Telephone Number, including area code: (979) 690-1711
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:

TITLE OF EACH CLASS NAME OF EACH ELECTRONIC SYSTEM ON WHICH QUOTED
Common Stock, par value $0.10 per share National Association of Securities Dealers Automated
Quotation System (NASDAQ)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value, as of June 30, 2002, of the common stock (based on
the average of the high and low trade prices of these shares on NASDAQ) of O. I.
Corporation held by non-affiliates was approximately $11,693,704.

The number of shares outstanding of the common stock as of March 17, 2003 was
2,759,273.

DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 2003 Annual Meeting of Shareholders
Part III information is incorporated by reference to the Proxy Statement

PART I

ITEM 1. BUSINESS

GENERAL

O. I. Corporation (the "Company") is a corporation that was organized in 1963,
in accordance with the Business Corporation Act of the State of Oklahoma, as
Clinical Development Corporation, a builder of medical and research
laboratories. In 1969, the Company moved from Oklahoma City, Oklahoma to College
Station, Texas, and the Company's name was changed to Oceanography International
Corporation. The Company's name was changed to O.I. Corporation in July 1980;
and in January 1989, the Company filed to do business as OI Analytical to better
align the company name with the products offered and markets served.

The Company designs, manufactures, markets, and services products primarily for
specialized applications in the analytical instruments markets, including sample
preparation, detection, measurement, and monitoring instruments used to analyze
chemical compounds. The Company's principal business strategy is to direct its
product development capabilities, manufacturing processes, and marketing skills
toward market niches, which it believes it can successfully penetrate and
quickly assume a leading position. Management continually emphasizes product
innovation, improvement in quality and product performance, on-time delivery,
cost reductions, and other value-added activities. The Company seeks growth
opportunities through technological and product improvement, the development of
new applications for existing products, and by acquiring and developing new
products, new markets, and new competencies.

DEVELOPMENT OF THE COMPANY

The Company has historically expanded through internal development of new
products and technologies, through the acquisition of technologies, product
lines, market positions, competencies, and businesses, and through entering into
alliances, distributorships, original equipment manufacturer supply agreements
(OEMs), and value added reseller agreements (VARs). Such developments,
acquisitions, and agreements have provided the Company additional technologies,
specialized manufacturing or product development expertise, and broader
capabilities in marketing and distribution. Recent developments include:

During the quarter ended September 30, 2002, the Company completed an evaluation
of the future prospects of certain products and determined to discontinue
manufacturing, sales, service, and support for certain sample preparation, gas
chromatography, and ion analyzer products. The Company came to these decisions
because purchase components are no longer available for support of those
products, and sales volume for those products no longer represent a viable
business opportunity for the Company. As a result of these decisions, the
Company has determined that certain intangible assets amounting to approximately
$346,000 are impaired and inventory amounting to approximately $200,000 is
obsolete, together resulting in an expense of $546,000 for the period. The
impaired intangible assets are from prior acquisitions and consist primarily of
acquired trade names and patents that are no longer used, and the inventory
write-off consists primarily of obsolete inventory resulting from the
discontinuation of products.

On December 18, 2001, the Company announced that it had been awarded a contract
by Parsons Infrastructure & Technology Group, Inc., amounting to approximately
$2,000,000, later amended to approximately $2,537,000, to supply a
chemical-agent air-monitoring system for the Newport Chemical Agent Disposal
Facility ("NECDF") in Newport, Indiana. This system will include MINICAMS(R) air
monitors and the CHROM-NET(TM) networking and data-acquisition system. Parsons
is under contract with the U.S. Department of Defense (U.S. Army), to supply
chemical-agent monitoring equipment for the NECDF. The equipment will be used
for air monitoring during chemical-agent destruction to be completed at the
Newport plant. Parsons Infrastructure & Technology Group, Inc. granted to the
Company a series of purchase orders totaling approximately $3,200,000 for
MINICAMS. Due to changes in the scope of the equipment needed, approximately
$820,000 of this purchase order is currently on hold,

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and Parsons has indicated it is likely to be cancelled. During the fourth
quarter ended December 31, 2002, shipments and revenue recognition under the
Parson's purchase orders were $162,000 and $834,000, respectively. During 2002,
approximately $2,300,000 of shipments were recognized as revenues and at the end
of 2002, $7,900 was deferred for revenue recognition purposes.

On July 30, 2001, the Company sold the Aqua-Check(TM) product line to
AquaMetrix, Inc. of Markham, Ontario, Canada for $75,000. The Company obtained
the Aqua-Check product line in a purchase of the ALPKEM ion analyzer product
line from Perstorp Analytical in May 1996. Even though the Aqua-Check was not
the target of the Company's purchase, it was included, and it was not a
strategic fit with the Company's product line. The Aqua-Check product line
revenue and asset value were not material to the Company's revenues or assets.

The Company entered into an original equipment manufacturers' (OEM) agreement
with Agilent Technologies Inc. (Agilent), effective December 1, 2000,
subsequently renewed in December 2001 and December 2002. Since June 1988, the
Company had operated as a value added reseller (VAR) of analytical instruments
manufactured by Agilent (formerly Hewlett Packard Company). On September 15,
2000, Agilent notified the Company that the VAR agreement between the Company
and Agilent would not be renewed upon its expiration on November 30, 2000. Under
the terms of the expired VAR agreement with Agilent, the Company purchased
analytical instruments, including gas chromatographs (GCs) and mass
spectrometers (MS), integrated them with Company-manufactured components, and
marketed these analytical systems for environmental analysis to comply with U.S.
Environmental Protection Agency (USEPA) 500, 600, and 8000 Series Methods, and
for other chemical analyses.

Company sales under the VAR agreement, which include both Agilent and Company
components, are estimated to have been approximately 20% and 19% of total
Company revenues for the years 1999 and 2000, respectively. Agilent cited the
increasing competitive nature of the Company's products with their products as
the reason for not renewing the VAR agreement. The VAR agreement provided for
sales and marketing cooperation, whereas the OEM agreement does not provide for
marketing cooperation, and the Company and Agilent will compete for the same
business. Sales levels of GC systems and components have been substantially
lower than year 2000 due to the change in this relationship. No assurances can
be made that sales levels in the future under the Agilent OEM agreement will not
continue to decline.

On February 1, 1999, the Company acquired certain assets of General Analysis
Corporation (GAC), headquartered in South Norwalk, Connecticut. GAC designs,
manufactures, and markets infrared gas and liquid analytical instruments and
accessories used in laboratories, in-line and on-line liquid analysis and gas
analysis in field monitoring applications. The Company acquired GAC for $259,459
in cash and the assumption of approximately $1,100,000 in liabilities. In
addition, the Company may be obligated to make earn-out payments to the former
owner of GAC based upon the achievement of potential future revenue targets (See
Note 12 of the consolidated financial statements). In 2000, the Company reviewed
intangible assets including non-compete agreements, names, and unallocated
goodwill related to this acquisition and determined that some of them were
impaired; therefore, assets in the amount of $793,000, representing 91% of the
then unamortized acquired intangible assets, were written off by a charge to
expense.

PRODUCTS

The Company develops, manufactures, markets, and services analytical,
monitoring, and sample preparation products, components, and systems used to
detect, measure, and analyze chemical compounds. Such products include:

GAS CHROMATOGRAPHY INSTRUMENTS AND SYSTEMS The Company designs, manufactures,
markets, and services components for gas chromatographs (GCs), including
detectors and sample introduction instruments. Gas chromatography is an
analytical technique that separates organic compounds based on their unique
physical and chemical properties. The use of gas chromatography in a number of
diverse applications has led to the continuous development of a broad range of
sample introduction and detector devices. Advances in the field are based on
technology improvements that provide improved sample introduction, faster
analysis, lower level and selective detection, ease-of-use, and increased
reliability. GC instruments currently manufactured by the Company include the
following:

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Electrolytic Conductivity Detector (ELCD); Photoionization Detector
(PID); Flame-Ionization Detector (FID); Tandem PID/ELCD; Tandem PID/FID;
Halogen Specific Detector (XSD)(TM); Flame Photometric Detector (FPD);
Pulsed Flame Photometric Detector (PFPD); Injectors and Inlets;
Purge-and-Trap Sample Concentrator (P&T); P&T Autosamplers;
Preconcentration and Thermo Desorption Device; Air Tube Concentrators,
Volatile Organic Sample Train (VOST); and Multi-Point Sampling Inlet
Module.

The Company purchases analytical instruments including GCs and GC mass
spectrometers (GC/MS) manufactured by GC companies, including purchases under an
OEM agreement with Agilent Technologies, Inc. (Agilent), formerly Hewlett
Packard Company. The Company integrates GC components with GCs and GC/MS to form
customized GC analyzer systems including: VOC (volatile organic carbon)
analyzers, BTEX (Benzene, Toluene, Ethylbenzene, and Xylenes) analyzers,
pesticide analyzers, fluorinated by-products (FBA) analyzers, continuous
emissions monitoring (CEM), continuous air monitoring analyzers for air toxins
and VOCs, permeating testing, and ethyleneoxide analyzers.

The Company configures GC systems in standard and custom configurations to meet
market needs in the laboratory, in the field, and on line. Configured systems
can analyze chemical compounds in gas, liquids, or solids matrices using the
appropriate components. The Company purchases GCs and GC/MSs manufactured by
others and procures GC components, GCs, and GC/MSs pursuant to a number of
different arrangements, including an Original Equipment Manufacturer (OEM)
Agreement with Agilent.

TOTAL ORGANIC CARBON ANALYZER SYSTEMS The Company designs, manufactures,
markets, and services Total Organic Carbon (TOC) analyzers and related
accessories that are used to measure organic and inorganic carbon levels in
ultrapure water, drinking water, groundwater, wastewater, soils, and solids. The
Company's TOC analyzers are used in testing required by the USEPA and testing
ultrapure water used in U.S. pharmaceutical methods; the manufacturing of
semiconductors; power generation; and oceanographic research. TOC products
produced by the Company include: High Temperature Persulfate TOC Analyzer;
Combustion TOC Analyzer; and TOC Solids Analyzer.

ION ANALYSIS SYSTEMS The Company designs, manufactures, markets, and services
Segmented Flow Analyzers (SFA), Flow Injection Analyzers (FIA), and field
portable instruments such as the Flow Solution(R) IV; Flow Solution 3000; and
CNSolution(TM) 3000 (cyanide analyzer). These instruments perform a wide range
of ion analyses, including the measurement of nitrate, nitrite, phosphate,
ammonia, chloride, alkalinity, and sulfate in liquids. The Company's CN Analyzer
can perform total cyanide analysis in a number of industrial applications
including cyanide testing in gold and silver mining, electroplating, metal
finishing, and semiconductor operations. The SFA, FIA, and CN Analyzer products
may be equipped with autosamplers to enhance productivity.

SAMPLE PREPARATION PRODUCTS AND SYSTEMS The Company designs, manufactures,
markets, and services sample preparation instrumentation used to prepare sample
matrices for analysis. The most time-consuming part of chemical analysis is
sample preparation. Procedures, techniques, and instruments that can reduce
total sample preparation time are highly desirable for analysis of chemical
compounds. The Company's sample preparation products and systems include
Microwave Digestion Systems; and Gel Permeation Chromatography (GPC) Systems.

FILTOMETERS The Company designs, manufactures, markets, and services
non-dispersive infrared instruments (NDIR) that are sometimes called
filtometers. The filtometer uses a light source and an interference filter to
send light of a specific wavelength through a sample. The sample's absorbance of
the light, as measured by a suitable detector, is a direct measure of the
sample's concentration. This makes the filtometer well suited to making repeated
measurements on individual samples or continuously on a process stream or air.
The Company provides two products employing filtometer technology including:

CONTINUOUS REFRIGERANT MONITORS are used by the chiller/refrigerant
industry for the rapid detection of low-level refrigerant leaks. These
instruments can monitor for all refrigerants including CFCs
(chlorofluorocarbons), HFCs (hydrofluorocarbons), HCFCs
(hydrochloro-fluorocarbons), and ammonia and meet ASHRAE (American
Society of Heating, Refrigerating, and Air-conditioning Engineers)
15-1994 Safety Code Requirements.

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BEVERAGE ANALYZERS are used on-line and in the laboratory to measure
dissolved Brix (sugar), diet syrup, and carbon dioxide in beverages.
This equipment is currently used in soft-drink bottling plants,
breweries, and wineries.

SALES BY LOCATION

All of the Company's assets are located in the United States and all sales are
conducted in U.S. dollars. There have been no sales or transfers between
geographic areas during the last five fiscal years. Estimated net revenues
attributable to the United States, export revenues as a group, and the number of
countries in which export revenues were generated are as follows:

Sales to the European-African region was approximately 13% of net revenues for
2002; however sales did not exceed 10% of revenues to any particular
international geographic area for any of the years 1998 to 2001.

MANUFACTURING

The Company manufactures products by using similar techniques and methods at two
locations in the U.S. The Company's manufacturing capabilities include
electro-mechanical assembly, testing, integration of components and systems, and
calibration and validation of configured systems. The Company's products have
been certified pursuant to safety standards by one or more of the following
agencies: Underwriters Laboratories (UL), Canadian Standards Association (CSA),
and/or the European Committee for Electrotechnical Standardization (CE). These
agencies and others also certify that instruments meet certain performance
standards and that advertised specifications are accurate. During 1999, the
Company obtained ISO 9001 certification for its College Station, Texas
manufacturing operations. The Company is in the process of obtaining ISO 9001
certification for its Birmingham, Alabama manufacturing operations.

MARKETING

The Company markets and sells analytical components and systems that it
manufactures and that are purchased for resale, provides on-site installation
and support services, and distributes expendables and accessories required to
support the operation of products sold. The Company sells its products
domestically to end users through a direct sales channel, manufacturers'
representatives, distributors, and resellers, and internationally through
independent manufacturers' representatives and distributors. The Company's
marketing program for its products and services, both domestically and
internationally, includes advertising, direct mail, seminars, trade shows,
telemarketing, and promotion on the Company's Internet web site.

TECHNICAL SUPPORT

The Company employs a technical support staff that provides on-site
installation, service, and after-sale support of its products in an attempt to
ensure customer satisfaction. Technical support services are included in the
initial sale of

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certain products and if not included in the initial purchase, may be purchased
later by customers. The Company offers training courses, publishes technical
bulletins containing product repair information, parts lists, and application
support information for customers. Products sold by the Company generally
include a 90-day to one-year warranty. Customers may also purchase extended
warranty contracts that provide coverage after the expiration of the initial
warranty. The Company installs and services its products through its field
service personnel and through third party contractors in the United States and
Canada and through distributors and manufacturers' representatives
internationally.

RESEARCH AND DEVELOPMENT

The analytical instrumentation industry is subject to rapid changes in
technology. The Company's success is heavily dependent on its ability to
continually improve its existing products, advance and broaden employed
technologies, increase product reliability, improve product performance, and
improve handling of data produced from analysis, and at the same time to reduce
the physical size of the product, reduce cycle time of analysis, and maintain or
reduce product cost. Research and development costs, relating to both present
and future products, are expensed as incurred, and such expenses were $2,246,000
in 2002, $2,157,000 in 2001, and $1,943,000 in 2000. The Company actively
pursues development of potential new products, including custom-configured GC
systems and components, instrument control and data reporting software systems,
dedicated analyzers, including TOC and ion analyzers, microwave systems and
other sample preparation products, on-line beverage monitors, and continuous air
monitoring systems to measure refrigerants.

PATENTS

The Company holds both U.S. and international patents and has both U.S. and
international patent applications pending. The Company currently holds 26
patents as of year-end 2002, which expire between the years 2003 and 2019
compared to 30 patents in the prior year. As a matter of policy, the Company
vigorously pursues and protects its proprietary technology positions and seeks
patent coverage on technology developments that it regards as material and
patentable. While the Company believes that all of its patents and applications
have value, its future success is not dependent on any single patent or
application.

COMPETITION

The Company encounters aggressive competition in all aspects of its business
activity. The Company competes with many firms in the design, manufacture, and
sale of analytical instruments, principally on the basis of product technology
and performance, product quality and reliability, sales and marketing
capability, access to channels of distribution and product support, delivery,
and price. Most of the Company's competitors have significantly greater
resources than the Company in virtually all aspects of competition, including
financial and related resources, market coverage on a global basis, breadth of
product(s) in each market segment(s) served, access to human and technical
resources, buying power, and marketing strength, including brand recognition,
market share, and bundled product sales.

EMPLOYEES

As of December 31, 2002, the Company had 160 full-time employees. The Company
employs scientists and engineers who research and develop potential new
products. To protect the Company's proprietary information, the Company has
confidentiality agreements with its employees who come in contact with such
information. None of the Company's employees are covered by a collective
bargaining agreement. Management believes that relations between the Company and
its employees are good.

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EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company, their ages, positions, and offices, as of
December 31, 2002, are as follows:

William W. Botts joined the Company as President and Chief Operating Officer on
February 1, 1985, was named Chief Executive Officer of the Company on July 19,
1985, and Chairman of the Board of Directors of the Company on May 26, 1986.
Prior to joining the Company, he was Vice President and General Manager of the
Brandt Division of TRW Inc.; Executive Vice President and Chief Operating
Officer of The Brandt Company; Division General Manager of Sheller-Globe, Inc.;
Assistant Plant Manager, Arvin Industries; and Engineer, AMBAC Industries, Inc.

Jane A. Smith has been employed with the Company since 1973. She was named
Assistant Corporate Secretary in 1976 and Corporate Secretary in 1986. On May
22, 1990, she was named Vice President/Corporate Secretary.

Juan M. Diaz joined the Company as Corporate Controller on June 30, 2001. Prior
to joining the Company, he was Audit Manager for Arthur Andersen LLP in Houston,
Texas. He received his Certified Public Accountant certification in 2000.

ENVIRONMENTAL REGULATIONS

The Company believes it is in compliance with federal, state, and local laws and
regulations involving the protection of the environment. The Company routinely
handles small amounts of materials that might be deemed hazardous. Hazardous
materials are primarily introduced into the Company's products by end users
rather than by the Company. The Company believes there will be no material
effect upon its capital expenditures, earnings, and competitive position caused
by its compliance with federal, state, or local provisions regulating the
discharge of materials into the environment or relating to the protection of the
environment. However, to the extent that analytical instruments designed and
manufactured by the Company for environmental analysis are purchased by its
customers to assist them in complying with environmental regulations, changes to
these regulations could reduce demand for some of the Company's products.

SOURCES OF RAW MATERIALS

The Company produces its products from raw materials, component parts, and other
supplies that are generally available from a number of different sources. The
Company has few long-term contracts with suppliers. For certain purchased
materials, the Company has developed preferred sources on the basis of quality
and service. Several purchased components are supplied by single source
suppliers. There can be no assurance that these preferred or single sources will
continue to make materials available in sufficient quantities, at prices, and on
other terms and conditions that are adequate for the Company's needs. However,
there is no indication that any of these preferred or single sources will cease
to do business with the Company. The Company believes that in the event of any
such cessation, adequate alternate sources would be available, although perhaps
at increased costs to the Company or that the risk of cessation is only
significant to the Company's older products for which the Company plans to
discontinue manufacturing and support and that have been or will be replaced by
newer versions. The Company uses subcontractors to manufacture certain
components of its products. Subcontractors often are small businesses that can
be affected by economics and other factors that would impact their ability to be
a reliable supplier. Substitute suppliers and/or components may require
reconfiguration of products, which might result in significant product changes
in the view of customers, ultimately resulting in the Company having
discontinued such products.

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BACKLOG OF OPEN ORDERS

The Company's backlog of orders on December 31, 2002 was approximately
$5,326,928, compared to $3,529,000 for December 31, 2001, and $6,004,000 as of
December 31, 2000. The Company's policy is to include in its backlog only
purchase orders or production releases that have firm delivery dates in the
twelve-month period following December 31, 2002. Recorded backlog may not
result in sales because of purchase order changes, cancellations, or other
factors. The Company anticipates that substantially all of its present backlog
of orders will be shipped or completed during 2003.

CUSTOMERS

The Company's customers include various military agencies of the U.S.
government, industrial businesses, semiconductor manufacturers, engineering and
consulting firms, municipalities, environmental testing laboratories, beverage
bottlers, and chiller-refrigerant companies. One customer accounted for
approximately 10% of revenues in 2002, 12% of revenues in 2001; and no single
customer accounted for more than 10% of revenues for 2000; except that federal,
state, and municipal governments and public and private research institutions in
the aggregate accounted for 17% of revenues in 2002, 13% of revenues in 2001,
and 31% of revenues in 2000. A decrease in sales to these groups could have a
material adverse impact on the Company's results of operations. Export sales
accounted for 25% of revenues in 2002, compared to 18% of revenues in 2001, and
20% in 2000.

ITEM 2. PROPERTIES

The Company owns a facility with space of approximately 68,650 sq.ft. located on
11.29 acres of land in College Station, Texas and until January 31, 2003, leased
warehouse space of approximately 4,500 sq.ft. near its facility. The Company
leases approximately 20,000 sq.ft. of office, engineering, laboratory,
production, and warehouse space in Pelham, Alabama, a suburb of Birmingham,
under a lease expiring in December 2006. The Company also leases 500 sq.ft. of
office space in Edgewood, Maryland under a lease, which can be automatically
renewed annually up to three years. The Company believes that its facilities are
in good condition and are suitable for its present operations and that suitable
space is readily available for expansion or if any of its leases are not
extended.

ITEM 3. LEGAL PROCEEDINGS

From time to time, in the ordinary course of business, the Company has received,
and in the future may receive, notice of claims against it, which in some
instances have developed, or may develop, into lawsuits. Management does not
expect any pending claim to have a material adverse effect on the consolidated
financial position and results of operations of the Company.

Certain claims are pending against the Company with respect to matters arising
out of the ordinary conduct of its business. For all claims, in the opinion of
management, based upon presently available information, either adequate
provision for anticipated costs has been made by insurance, accruals or
otherwise, or the ultimate anticipated costs resulting will not materially
affect the Company's consolidated financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the security holders of the Company,
through solicitation of proxies or otherwise, during the fourth quarter of 2002.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

COMMON STOCK MARKET INFORMATION The Company's Common Stock trades on the NASDAQ
Stock Market under the symbol: OICO. Information below is contained in a
statistical report obtained from the National Association of Securities Dealers,
Inc. (NASD). The ranges of high and low trade prices for the Company's Common
Stock for 2002 and 2001 were as follows:

NOTE: The above quotations represent prices between dealers, do not include
retail markup, markdown, or commission, and may not necessarily
represent actual transactions.

DIVIDENDS The Company has never paid dividends on the Common Stock, and
management does not anticipate paying any dividends in the near future.

APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK As of March 17, 2003, there were
approximately 887 holders of record of the Company's Common Stock.

EQUITY COMPENSATION PLAN INFORMATION is incorporated by reference in Item 12.

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ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CONTRACT WITH PARSONS INFRASTRUCTURE & TECHNOLOGY GROUP, INC. On December 18,
2001, the Company announced that it had been awarded a contract by Parsons
Infrastructure & Technology Group, Inc. to supply a chemical-agent
air-monitoring system for the Newport Chemical Agent Disposal Facility ("NECDF")
in Newport, Indiana. The order includes MINICAMS air monitors and the CHROM-NET
networking and data-acquisition system. Parsons is under contract with the U.S.
Department of Defense (U.S. Army), to supply chemical-agent monitoring equipment
for the NECDF. The equipment will be used for air monitoring during
chemical-agent destruction to be completed at the Newport plant. Parsons granted
a series of purchase orders totaling approximately $3,200,000 for MINICAMS, and
subsequently approximately $820,000 of the remaining order was placed on hold,
and Parsons has indicated it is likely to be cancelled. During the fourth
quarter, shipments and revenue recognition under the Parson's purchase orders
were approximately $162,000 and $834,000, respectively. At the end of the fourth
quarter, shipments amounting to $7,900 were deferred for revenue recognition
purposes.

VALUE ADDED RESELLER (VAR) AGREEMENT WITH AGILENT TECHNOLOGIES, INC. (AGILENT)
On September 15, 2000, Agilent notified the Company that the VAR agreement
between the Company and Agilent would not be renewed upon its expiration on
November 30, 2000. Company sales under the VAR agreement, which include both
Agilent and Company components, are estimated to have been approximately 20% and
19% of total Company revenues for

10

the years 1999 and 2000, respectively. Agilent cited the increasing competitive
nature of the Company's products with their products as the reason for not
renewing the VAR agreement. The VAR agreement provided for sales and marketing
cooperation, whereas the original equipment manufacturers (OEM) agreement does
not provide for marketing cooperation, and therefore, the Company and Agilent
will compete for the same business. On December 1, 2000, the Company entered
into an OEM agreement with Agilent, subsequently renewed in December 2001 and
December 2002. No assurances can be made that Agilent will renew the OEM
agreement, nor that the Company will sustain sales levels in the future under
the Agilent OEM agreement. As the Company continues to evaluate its
alternatives, it may be determined that continuing the OEM agreement is not its
best strategy.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to implement critical accounting
policies and to make estimates that could significantly influence the results of
operations and financial position. The accounting policies and estimates that
significantly influence the results of the Company's operations and its
financial position include revenue recognition policies, the valuation allowance
for inventories and accounts receivable, evaluation of the impairment of and
estimated useful lives of goodwill and intangible assets, estimates for future
losses on product warranties, and the necessity for a deferred income tax asset
valuation reserve.

REVENUE RECOGNITION The Company derives revenues from three sources: system
sales, part sales, and services. For system sales and parts sales, revenue is
generally recognized when persuasive evidence of an arrangement exists, delivery
has occurred, the contract price is fixed or determinable, title and risk of
loss has passed to the customer and collection is reasonably assured. The
Company's sales are typically not subject to rights of return and, historically,
sales returns have not been significant. System sales that do not involve unique
customer acceptance terms or new specifications or technology with customer
acceptance provisions, and that involve installation services are accounted for
as multiple-element arrangements, where the larger of the contractual billing
hold back or the fair value of the installation service is deferred when the
product is delivered and recognized when the installation is complete. In all
cases, the fair value of undelivered elements, such as accessories ordered by
customers, is deferred until the related items are delivered to the customer.
For certain other system sales that do involve unique customer acceptance terms
or new specifications or technology with customer acceptance provisions, all
revenue is generally deferred until customer acceptance. Revenue related to part
sales is recognized when the parts have been shipped and title and risk of loss
have passed to the customer. Deferred revenue, net of related deferred cost of
sales is presented, as unearned revenues in accrued liabilities in the
accompanying consolidated balance sheets.

Products generally carry one year of warranty. Once the warranty period has
expired, the customer may purchase an extended product warranty typically
covering an additional period of one year. Extended warranty billings are
generally invoiced to the customer at the beginning of the contract term.
Revenue from extended warranties is deferred and recognized ratably over the
duration of the contracts. Unearned maintenance and extended warranty revenue is
included in deferred revenues in accrued liabilities in the accompanying
consolidated balance sheets.

Revenues from bill and hold sales are recognized in accordance with the criteria
specified in SAB 101. In addition to the criteria above, the customer must
request that the transaction be on a bill and hold basis and have a substantial
business purpose for ordering the goods on that basis; there must be a
reasonable, fixed schedule for delivery consistent with the business purpose,
the Company no longer retains any performance obligations and the earnings
process must be substantially complete, and the items sold are segregated from
the rest of the Company's inventory and must be ready for final shipment to the
customer.

INVENTORIES Inventories consist of electronic equipment and various components.
The Company operates in an industry where technological advances or new product
introductions are a frequent occurrence. Either one of these

11

occurrences can make obsolete or significantly impair customer demand for a
portion of the Company's inventory on hand. The Company regularly evaluates its
inventory and maintains a reserve for inventory obsolescence and excess
inventory. As a policy, the Company provides a reserve for products with no
movement in six months or more and which management determines, based on
available market information, are no longer saleable. The Company also applies
subjective judgment in the evaluation of the recoverability of the rest of its
inventory based upon known and expected market conditions and company plans. If
the Company's competitors were to introduce a new technology or product that
renders a product sold by the Company obsolete or unnecessary, it could have a
significant adverse effect on the Company's future operating results and
financial position.

The Company has experienced significant changes in required reserves in recent
periods due to changes in strategic direction, such as discontinuances of
product lines, as well as declining market conditions. As a result, we incurred
net inventory charges of approximately $200,000 during fiscal 2002.

ACCOUNTS RECEIVABLE The Company maintains allowances for doubtful accounts for
estimated losses resulting from the failure of its customers to make required
payments and for estimated sales returns. Customers may not make payments or
return products due to a variety of reasons including deterioration of their
financial condition or dissatisfaction with the Company's products. Management
makes regular assessments of doubtful accounts and uses the best information
available including correspondence with customers and credit reports. If the
Company determines that there is impairment in the ability to collect payments
from customers, additional allowances may be required. However, the Company does
not believe that there is significant likelihood of this risk from a single
customer since the Company does not have a significant credit concentration risk
with any one single customer. Historically, the Company has not experienced
significant bad debt losses, but the Company could experience increased losses
if general economic conditions were to deteriorate, resulting in the impairment
of a number of its customers' ability to meet their obligations, or if
management made different judgments or utilized different estimates for sales
returns and allowances for doubtful accounts.

GOODWILL AND INTANGIBLE ASSETS The Company's intangible assets primarily include
product patents, trade names, trademarks, manufacturing rights, and know-how.
The Company adopted Statement of Financial Accounting Standards No. 142, on
January 1, 2002, as required. Accordingly, the Company reviews the
recoverability and estimated useful lives of other intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. During the quarter
ended September 30, 2002, the Company completed an evaluation of the future
prospects of certain products and determined to discontinue manufacturing,
sales, service, and support for certain sample preparation, gas chromatography,
and ion analyzer products. The Company came to these decisions because purchase
components are no longer available for support of those products, and sales
volume for those products no longer represent a viable business opportunity for
the Company. As a result of these decisions, the Company has determined that
certain intangible assets amounting to approximately $346,000 were impaired and
written off by a charge to expense. The impaired intangible assets are from
prior acquisitions and consist primarily of acquired trade names and patents
that are no longer used, resulting from the discontinuation of products. In the
fourth quarter of 2000, the Company performed such an analysis for intangible
assets related to the acquisition of GAC. Sales of beverage analyzers and
refrigerant monitors remained below expectations in 2000. The Company failed to
complete development of a new beverage analyzer in the fourth quarter of 2000 as
originally planned. In December of 2000, a new development team decided to
redesign the electronics and software platforms of the product to reduce cost
and increase ease-of-use. As a result of the analysis for impairment, some
intangible assets, including non-compete agreements, names, and unallocated
goodwill relating to the acquisition of GAC in February 1999 in the amount of
$793,000 were determined to be impaired and were written off by a charge to
expense in the fourth quarter of 2000. In the fourth quarter of 2000, the
Company also evaluated the profitability and anticipated customer demand for a
GC inlet product acquired in 1999 and found that the product was under
performing compared to expectations. Because of this analysis, the book value of
goodwill relating to manufacturing rights of such product was deemed impaired,
and an impairment of $167,000 was charged to expense in the fourth quarter of
2000.

12

PRODUCT WARRANTIES Products are sold with warranties ranging from 90 days to one
year, and extended warranties may be purchased for some products. Estimated
expenses associated with these warranties are provided for in the accompanying
financial statements at the time of revenue recognition. The Company makes
estimates of these costs based on historical experience and on various other
assumptions including historical and expected product failure rates, material
usage, and service delivery costs incurred in correcting a product failure.
Should actual product failure rates, material usage, or service delivery costs
differ from estimates, revisions to the estimated warranty liability would be
required.

STOCK-BASED COMPENSATION The Company elected to account for fixed award stock
options and non-employee directors' options under the provisions of APB Opinion
No. 25 "Accounting for Stock Issued to Employees." As such, no compensation cost
has been recorded in the financial statements relative to these options. The
Company utilizes the Black-Scholes option pricing model to estimate the fair
value of these options for disclosure purposes.

Stock granted to non-employee directors are accounted for in accordance with
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." Accordingly, directors' stock is recorded as compensation expense
at estimated fair value on the date the stock is earned by the director.

INCOME TAXES The Company provides for deferred taxes in accordance with
Statement of Financial Accounting Standards No. 109 (FAS 109) Accounting for
Income Taxes, which requires the Company to use the asset and liability approach
to account for income taxes. This approach requires the recognition of deferred
income tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities. The primary sources of the Company's income tax differences are
deferred tax assets created by differences between the depreciable and
amortizable lives for book and tax purposes of the Company's fixed and
intangible assets and other deductions that must be deferred into the future in
accordance with the Code. Pursuant to FAS 109, the Company may record a
valuation allowance to reduce its deferred tax assets to the amount that is more
likely than not to be realized. To make such a determination, the Company
considers historical and future taxable income. In the event the Company's
financial position deteriorates, the Company may determine that it would not be
able to realize its deferred tax assets in the future. Likewise, the Company may
make a determination that it would be able to realize its entire net deferred
tax asset in the future. Such determinations may significantly affect the
Company's results of operations and financial position in the period such
determination is made.

RESULTS OF OPERATIONS

Net income decreased 67% during 2002, compared to 2001, due primarily to lower
revenues, lower sales of higher gross margin products, and increased spending on
research and development. The Company continued to pursue its strategy of
maintaining a presence in the environmental testing market, while seeking out
opportunities in other markets, such as the pharmaceutical, petrochemical,
semiconductor, refrigerant, and food and beverage markets; however, a slower
economy and delays in realizing sales of new products resulted in lower sales in
2002 compared to 2001. Revenues decreased 8% in 2002 from 2001, due to lower
sales of MINICAMS, ion analyzers, sample preparation products, TOC analyzers and
refrigerant monitors, offset by increases in revenues from GC components and
systems, and service. Operating income decreased 78% due to lower sales, the
write-off of obsolete inventory, and impaired intangible assets, unfavorable
product mix, and increased spending for development of potential new products.
Selling, general, and administrative expenses were 31.8% of revenues in 2002, up
from 28.9% of revenue in 2001, and 30.4% of revenue in 2000. The Company
continued to invest in research and development as expenses from research
activities increased as a percentage of revenues to 9.5% in 2002, up from 8.3%
in 2001. Expenses from impairments of intangible assets increased 100% in 2002,
due to impairments of intangible assets relating to past acquisitions and the
discontinuation of manufacturing and support for certain products.

13

The following table summarizes the results of the Company's operations for each
of the past three years. All percentage amounts were calculated using the
underlying data in thousands.

TOTAL REVENUES decreased 8% to $23,683,000, compared to $25,869,000 in 2001, due
to lower sales of MINICAMS, TOC analyzers, ion analyzers, sample preparation
products, beverage analyzers and refrigerant monitors, offset by higher revenues
from GC components and systems, service and rentals. Total revenues increased 6%
to $25,869,000 in 2001, compared to $24,401,000 in 2000, due to increased sales
of MINICAMS, TOC analyzers and refrigerant monitors, offset by declines in
revenues from GC components and systems, ion analyzers, sample preparation
products, beverage analyzers, service and rentals.

Revenues from shipments of MINICAMS decreased in 2002 due to lower shipments
under a contract with Parsons, compared to shipments in 2001 under a contract
with Bechtel National, Inc. (Bechtel). Under the Parsons purchase order,
revenues from shipments was approximately $2,300,000 in 2002. Parsons granted a
series of purchase orders totaling approximately $3,200,000 for MINICAMS, and
subsequently approximately $820,000 of the remaining order was placed on hold
due to changes in the scope of the equipment needed, and Parsons has indicated
it is likely to be cancelled. Revenues from MINICAMS increased in 2001 due to
deliveries under a contract with Bechtel. During 2000, the Company announced it
received a purchase order amounting to approximately $4,100,000 (later revised
to $4,600,000) from Bechtel. The Company recognized revenues from deliveries
under this contract in 2000 of approximately $1,200,000 and completed deliveries
under this contract in 2001 recognizing revenues of approximately $3,400,000 in
2001.

Revenues from total organic carbon (TOC) analyzers decreased in 2002, compared
to 2001 due to lower sales domestically, which more than offset an increase in
international sales. Revenues from TOC analyzers increased in 2001 compared to
2000 due to an increase in demand in Europe and Asia.

Revenues from microwave digestion products decreased in 2002, compared to 2001,
due to a decline in sales to both domestic and international markets. Revenues
from microwave digestion products decreased in 2001 compared to 2000 due to
lower sales to Asia. The Company's microwave digestion product design has not
been updated since 1997, and competitors have introduced a number of features
not available on the Company's microwave product.

Revenues from gas chromatography (GC) components and systems increased in 2002
due to an increase in GC sample introduction products and GC systems, which more
than offset a decrease in GC detectors. Also contributing to the increase in
revenues was a customer deciding to purchase products that were under an
operating lease. Revenues from GC components and systems decreased in 2001
compared to 2000 due to lower sales relating to the non-renewal in 2001 of a
value added reseller (VAR) agreement with Agilent Technologies, Inc. Beginning
in June 1988, the Company operated as a VAR of analytical instruments
manufactured by Agilent Technologies, Inc. (formerly Hewlett Packard Company).
Under the terms of the expired VAR agreement with Agilent, the Company purchased
analytical instruments, including GCs, and mass spectrometers (MS), integrated
them with Company-manufactured components, and marketed these analytical systems
for environmental analysis to comply with USEPA 500, 600, and 8000 Series
Methods, and for other chemical analyses.

14

On September 15, 2000, Agilent notified the Company that the VAR agreement
between the Company and Agilent would not be renewed upon its expiration on
November 30, 2000. The Company entered a one-year original equipment
manufacturers (OEM) supply agreement with Agilent, effective December 1, 2000,
which may be terminated under certain conditions by either party. The Company
and Agilent renewed the OEM agreement in December 2001 and December 2002.

The VAR agreement provided for sales and marketing cooperation with Agilent,
whereas under an OEM agreement, no marketing cooperation is provided. The
Company now competes directly with Agilent and others for sales of GC components
and systems in the environmental testing and other markets.

Revenues from ion analyzers decreased in 2002 compared to 2001 due to increased
competition in Europe and domestically the emergence of a competitive
technology. The competitive technology referred to as discrete analyzers does
not perform all analyses as does ion analyzers, and it is too early to know to
what extent it will impact the demand for ion analyzers. Revenues from ion
analyzer products decreased in 2001 compared to 2000 due to increased
competition in markets served.

Revenues from Gel Permeation Chromatography (GPC) products decreased in 2002
compared to 2001 due to the narrowing of the products offered to increase focus
on new higher-margin products. Revenues from gel permeation chromatography
products decreased in 2001, compared to 2000 due to the entry of a new U.S.
competitor and reduced demand.

Revenues from beverage analyzers decreased in 2002 compared to 2001, and
revenues in 2001 decreased compared to 2000 due to delays in the completion of a
new product design. The new beverage product, named LAN 9000, was introduced in
October 2002 at the Interbev Conference and Exhibition. If the new LAN 9000 is
not well received, the current level of sales will continue to decrease.

Revenues from refrigerant air monitor products decreased in 2002 compared to
2001 due to lower market demand, and increased in 2001, compared to 2000 due to
the introduction of a newly designed refrigerant monitor product.

Net revenues from providing customer services, including rentals of the
Company's products decreased in 2002, compared to 2001. The decrease is
primarily attributable to improvements in the management of the Company's
service resources and efforts to increase the Company's service coverage area.
Revenues derived from rentals decreased due to a customer choosing to make early
payment on operating leases and to negotiate the purchase of the equipment,
effectively negotiating the purchase of a significant portion of the Company's
rental inventory. The Company still maintains a rental inventory and offers it
for rent to customers who need substitute equipment while their equipment is
being serviced or who wish to temporarily use the Company's equipment.

Export revenues increased 29% in 2002 to $5,984,000, due to increased demand for
organic volatile and inorganic nutrient monitoring solutions within the
environmental and industrial client base, although difficult local economic
conditions and competition continue to affect sales in those regions. Sales to
Latin America decreased in 2002, compared to 2001, due to continuing adverse
local economic conditions and incomplete sales coverage in that region. Export
revenues decreased 7% to $4,638,000 in 2001, compared to 2000, due to economic
recession in certain Latin American and Asian countries. International revenues
as a percent of total revenues were 25% in 2002, compared to 18% in 2001, and
20% for 2000.

Neither inflation nor changing prices have had a material impact on the
Company's net revenues over the past three fiscal years.

The current economic downturn has resulted in reduced purchasing and capital
spending in many of the markets that the Company serves, in particular,
industrial and government customers. In addition, the environmental instrument
market in which the Company competes has been flat or declining over the past
several years. The Company remains cautiously optimistic about future sales and
has identified a number of strategies it believes will allow it to

15

grow its business despite this decline, including the acquisition of
complementary businesses, developing new applications for its technologies, and
strengthening its presence in selected geographic markets. No assurance can be
given that the Company will be able to successfully implement these strategies,
or if successfully implemented, that these strategies will result in growth of
the Company's business.

GROSS PROFIT Gross profit, as a percentage of net revenues decreased to 45% in
2002, compared to 47% in 2001, and 45% in 2000. Lower gross profit in 2002,
compared to 2001, was due to a change in product mix to lower sales of higher
margin products and partially due to the write-off of $200,000 of obsolete
inventory from the discontinuation of certain products. Increased gross profit
in 2001, compared to 2000, was primarily due to a shift of product mix from
low-margin product sales to more profitable products. Gross profit as a
percentage of net revenues in 2001 also increased compared to 2000 due to
improved manufacturing efficiencies offset by increased provisions for warranty
costs. Gross profit as an absolute dollar amount decreased 13% in 2002, compared
to 2001, due to lower revenues and product mix; and increased 12% in 2001 from
2000, due to higher revenues and product mix.

SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES SG&A expenses were
$7,525,000 in 2002, or 31.8% of revenues, compared to $7,475,000 in 2001, or
28.9% of revenues, and $7,410,000, or 30.4% of revenues in 2000. SG&A expenses
increased in 2002, compared to 2001, primarily due to increased print
advertising and other marketing activity, increased rent expense from its leased
facilities in Birmingham, Alabama, and increases in expenses incurred for
professional services. The increase was partially offset as the Company
decreased its contribution to the employee 401(k) plan during 2002, compared to
2001. SG&A expenses increased in absolute dollar amounts but decreased as a
percentage of net revenues in 2001, compared to 2000. The increase in absolute
dollars was primarily due to increased benefits offset by decreased amortization
expense. The Company increased its contribution to the employee 401(k) plan
during 2001, compared to 2000. Amortization expense decreased during 2002 due to
the lower intangible assets base resulting from the write-off of goodwill and
other intangible assets during 2002 and 2000.

RESEARCH AND DEVELOPMENT (R&D) EXPENSES R&D expenditures increased 4% to
$2,246,000 or 9.5% of revenues in 2002, compared to $2,157,000, or 8.3% of
revenues in 2001. The increase was due to efforts to develop and introduce
potential new products, including purchase of contract R&D services, and
purchases of research supplies and equipment. R&D expenses increased to
$2,157,000, or 8.3% of revenues in 2001, compared to $1,943,000, or 8% of
revenues in 2000 due to the Company's new product development efforts on
software updates to comply with 21 CFR, a new refrigerant monitor, new beverage
monitor, and other possible new products. The Company continues to invest in R&D
activities to develop and introduce new products.

IMPAIRMENT OF INTANGIBLE ASSETS Charges for impairments of intangible assets
were $346,000 in 2002, compared to $-0- in 2001, and $960,000 in 2000.

During the quarter ended September 30, 2002, the Company completed an evaluation
of the future prospects of certain products and determined to discontinue
manufacturing, sales, service, and support for certain sample preparation, gas
chromatography, and ion analyzer products. The Company came to these decisions
because purchase components are no longer available for support of those
products, and sales volume for those products no longer represent a viable
business opportunity for the Company. As a result of these decisions, the
Company has determined that certain intangible assets amounting to approximately
$346,000 are impaired and inventory amounting to approximately $200,000 is
obsolete, together resulting in an expense of $546,000 for the period. The
impaired intangible assets are from prior acquisitions and consist primarily of
acquired trade names and patents that are no longer used, and the inventory
write-off consists primarily of obsolete inventory resulting from the
discontinuation of products.

The Company failed to complete development of a new beverage analyzer in the
fourth quarter of 2000 as originally planned. In December of 2000, a new
development team decided to redesign the electronics and software platforms of

16

the product to reduce cost and increase ease-of-use. As a result of the analysis
for impairment, some intangible assets, including non-compete agreements, names,
and unallocated goodwill relating to the acquisition of GAC in February 1999 in
the amount of $793,000, were determined to be impaired and were written off by a
charge to expense in the fourth quarter of 2000. In the fourth quarter of 2000,
the Company also evaluated the profitability and anticipated customer demand for
a GC inlet product acquired in 1999 and found that the product was under
performing compared to expectations. Because of this analysis, the book value of
goodwill relating to manufacturing rights of such product was deemed impaired,
and an impairment of $167,000 was charged to expense in the fourth quarter of
2000.

INTEREST AND OTHER INCOME Interest and other income decreased 7% in 2002 from
2001 and increased 2% in 2001 from 2000. The decrease in interest and other
income from 2002 to 2001 was primarily due to a decrease in interest earned on
cash invested on funds invested in overnight investments and money market funds
due to a decrease in interest rates throughout 2002. The increase in interest
and dividend income in 2001 was due to increases in cash and invested daily
balance, offset by a decrease in short-term interest rates throughout 2001. The
Company has a policy of investing surplus cash in low-risk, short-term
investments of varying maturities to maximize return while maintaining
investment risk at a minimum.

INCOME BEFORE INCOME TAXES Income before income taxes decreased 71% in 2002 from
2001 due to lower sales, the write-off of obsolete inventory and impaired
intangible assets, unfavorable product mix, and increased spending for
development of potential new products. Income before income taxes increased 203%
from 2000 to 2001, primarily due to revenue growth in 2001, and a decrease in
charges for the impairment of intangible assets offset by increases in R&D
expenditures.

PROVISION FOR INCOME TAXES The Company's effective income tax rate was 24% in
2002, 32% in 2001, and 37% in 2000. The effective income tax rate decreased from
2001 to 2002 due to an increase in the dividends received deduction on
investments in preferred stocks. The effective income tax rate decreased in 2001
due to credits for R&D activities and a reduction in the weighted average state
income tax rate.

NET INCOME Lower net income in 2002, compared to 2001, was due to lower sales
volume, higher research and development cost, intangible asset impairments and
other charges on certain discontinued products. Net income increased 226% to
$2,006,000 in 2001, compared to $616,000 in 2000, and net income increased in
2001 due to an increase in net revenues, a decrease in charges related to the
impairment of intangible assets, and a decrease in the Company's effective
income tax rate.

BASIC AND DILUTED EARNINGS PER SHARE Basic earnings per share was $0.24 for
2002, $0.75 for 2001, and $0.21 for 2000, computed based on 2,755,634 shares
outstanding for 2002, 2,659,844 shares outstanding for 2001, and 2,895,615
shares outstanding for 2000. Diluted earnings per share were $0.24 for 2002,
$0.74 for 2001, and $0.21 for 2000, computed based on 2,778,478 shares
outstanding for 2002, 2,701,784 shares outstanding for 2001, and 2,896,841 for
2000.

17

LIQUIDITY AND CAPITAL RESOURCES The Company considers a number of liquidity
measures that aid in measuring the Company's ability to meet its financial
obligations. Such ratios, working capital, and changes in cash and cash
equivalents as of the end of the Company's last three years are as follows:

Working capital increased 8%, or $877,000, to $12,355,000 in 2002, compared to
$11,478,000 in 2001. Working capital increased 28%, to $11,478,000 in 2001,
compared to $8,983,000 in 2000. The current ratio decreased to 3.8 in 2002 from
4.2 in 2001 due to a decrease in net income, increases in investments, and
increases in capital equipment purchases. The current ratio increased to 4.2 in
2001, from 3.2 in 2000, primarily due to current-year net income and cash
produced by operations, as well as decreases in accounts payable and accrued
liabilities.

Days in accounts receivable increased to 63 days in 2002 compared to 53 days in
2001 due to a decrease in net revenues and an increase in unearned revenues.
Days sales in accounts receivable increased one day in 2001 to 53 days, compared
to 52 days in 2000. Average annual inventory turnover was 3.0 times in 2002, 2.6
times in 2001, and 2.5 times in 2000.

During 2002, the Company generated $2,979,000, or a 22% increase over 2001, in
cash flows from operating activities, which represents the Company's principal
source of cash. The increase in operating cash flows in 2002 was primarily due
to an increase in accrued liabilities. During 2001, the Company generated
$2,435,000, or a 108% increase over 2000, in cash flows from operating
activities. Cash flows from operating activities resulted primarily from the
Company's net income and changes in operating working capital. Net cash flow
provided by operating activities for 2000 was $1,174,000.

Cash flow (used in) investing activities in 2002 of $(2,234,000), a 241%
increase over 2001, was primarily due to the purchase of investments for the
Company's excess cash. Cash flow provided by (used in) investing activities was
$(655,000) in 2001 primarily due to the purchase of investments during 2001 and
the purchase of property, plant, and equipment. The Company invested a portion
of its available cash in investment grade preferred stock investments to
maintain liquidity. Cash flows from financing activities increased 136%,
compared to 2001, primarily due to a decrease in activity in the Company's stock
repurchases. Cash flow used in financing activities was $(84,000) in 2001,
compared to $(1,343,000) in 2000. The decrease in cash used for financing
activities resulted primarily from a decrease

18

in activity during 2001 in the stock repurchase program. Since 1995, the Company
has repurchased an aggregate of 1,727,378 shares at an average purchase price of
$3.95 per share. The Company may only purchase up to an additional 47,622 shares
under the current stock repurchase program. The Company is seeking alternatives
that are better uses of its cash. If better uses are not found, the Company may
seek an expansion of this program in the future if it believes repurchases
continue to be in the best interests of the Company.

AGGREGATE CONTRACTUAL OBLIGATIONS

The Company has historically been able to fund working capital and capital
expenditures from operations, and expects to be able to finance its 2003 working
capital requirements from cash on hand and funds generated from operations.
However, demand for the Company's products is influenced by the overall
condition of the economy in which the Company sells its products, by the capital
spending budgets of its customers and by Company's ability to successfully meet
the needs of its customers through its product offerings. The environmental
instrument markets, in which the Company competes, have been flat or declining
over the past several years, and the current economic downturn has resulted in
reduced purchasing and capital spending in many of the markets that we serve
worldwide. In particular, industrial and government customers are currently in a
downward cycle characterized by diminished product demand, excess manufacturing
capacity, and the erosion of average selling prices. We are uncertain how long
the current downturn will last. Any further decline in our customers' markets or
in general economic conditions would likely result in a further reduction in
demand for our products and services and could harm our results of operations
and, therefore, harm the primary source of our cash flows.

Other matters that could affect the extent of funds required within the short
term and long term include potential, future acquisitions of other business and
extensive investments in product R&D activities or spending to develop markets
for the Company's products. The Company may engage in discussions with third
parties to acquire new products or businesses or to form strategic alliances and
joint ventures. This type of transaction may create a need for increased cash
flow from sources other than the Company's current operating activities to
complete these transactions. The Company believes that the sources of such funds
would come from traditional institutional debt financing or other types of debt.
In addition, the Company may engage in significant R&D spending or market
developing activities above current operating levels in order to respond to
perceived market opportunities. These activities may cause the Company to seek
additional funds from sources other than its current operating activities. If
the need arises in the future for funding of acquisitions, R&D or marketing
activities, the Company may not be able to attain such funding on terms that are
favorable.

The Company allowed its standby line of credit to expire during 2001, because a
fee was instituted to maintain the standby line of credit. The line of credit
was renewable on an annual basis and expired March 24, 2001. The line of credit
provided for secured borrowings up to $1,300,000 at an interest rate of the
bank's base rate plus 1%. The agreement contained, among other provisions,
requirements for maintaining defined levels of working capital and net worth,
and required an annual fee of one point at the maturity of the line on the total
funds advanced against the line. If the need arises in the future for such a
facility, the Company will attempt to attain one on favorable terms.

SEGMENT INFORMATION The Company manages its businesses primarily on a product
and services basis. The Company operates its business as a single segment. See
Note 13 of the Company's financial statements for additional segment data.

Other than the items discussed above, management is not aware of other
commitments or contingent liabilities, which would have a materially adverse
effect on the Company's financial condition, results of operations, or cash
flows.

19

RISK FACTORS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K includes certain statements that are deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements, other than statements of historical facts, included
in this Form 10-K that address activities, events, or developments that the
Company expects, believes, or anticipates will or may occur in the future, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions, expected future developments, and
other factors it believes are appropriate in the circumstances. Such statements
are subject to a number of assumptions, risks, and uncertainties, many of which
are beyond the control of the Company. Investors are cautioned that any such
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward-looking
statements.

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in 2003 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.

THE ACTIONS TAKEN IN RESPONSE TO THE RECENT SLOWDOWN IN DEMAND FOR SOME OF THE
COMPANY'S PRODUCTS AND SERVICES COULD HAVE LONG-TERM ADVERSE EFFECTS ON THE
COMPANY'S BUSINESS. Certain of the Company's analytical instruments have been
experiencing lower revenues due to cancelled customer orders or increased
competition. To scale back the Company's operations and decrease its expenses in
response to this decrease in demand for certain products and services and
decrease in its revenue, it has reduced its workforce, cut back on the use of
temporary workers, and reduced discretionary spending.

There are several risks inherent in the Company's efforts to transition to a new
cost structure. These include the risk that the Company will not be able to
reduce expenditures quickly enough to restore profitability and may have to
undertake further restructuring initiatives. In addition, there is the risk that
cost-cutting initiatives will impair the Company's ability to effectively
develop and market products and remain competitive in the industries in which it
competes. Each of the above measures could have long-term effects on the
Company's business by reducing its pool of technical talent, decreasing or
slowing improvements in its products, making more difficult for it to respond to
customers, limiting its ability to increase production quickly if and when the
demand for its products increases and limiting its ability to hire and retain
key personnel. These circumstances could cause the Company's earnings to be
lower than they otherwise might be.

THE COMPANY'S OPERATING RESULTS AND FINANCIAL CONDITION COULD BE HARMED IF THE
INDUSTRIES, INTO WHICH IT SELLS ITS PRODUCTS, CONTINUE TO DEMAND FEWER PRODUCTS
SIMILAR TO PRODUCTS SOLD BY THE COMPANY. The current economic downturn has
resulted in reduced purchasing and capital spending in many of the markets that
we serve worldwide. In particular, industrial and government customers are
currently in a downward cycle characterized by diminished product demand, excess
manufacturing capacity and the erosion of average selling prices.

We are uncertain how long the current downturn will last. The terrorist attacks
on September 11, 2001 may have exacerbated this downturn or caused it to linger.
Any further decline in our customers' markets or in general economic conditions
would likely result in a further reduction in demand for our products and
services and could harm our consolidated financial position, results of
operations, cash flows, and stock price.

In addition, the environmental instrument markets in which the Company competes
have been flat or declining over the past several years. The Company has
identified a number of strategies it believes will allow it to grow its business
despite this decline, including acquiring complementary businesses, developing
new applications for its technologies, and strengthening its presence in
selected geographic markets. No assurance can be given that the Company will be
able to successfully implement these strategies, or if successfully implemented,
that these strategies will result in growth of the Company's business.

20

The Company's success is highly dependent upon implementation of its acquisition
strategy. Certain businesses acquired by the Company within the past five years
have produced net operating losses or low levels of profitability. Businesses
the Company may seek to acquire in the future may also be marginally profitable
or unprofitable. In order for any acquired business to achieve the level of
profitability desired by the Company, the Company must successfully change the
acquired companies' operations and improve their market penetration. No
assurance can be given that the Company will be successful in this regard. In
addition, promising acquisitions are difficult to identify and complete for a
number of reasons, including competition among prospective buyers and the need
for regulatory approvals, including antitrust approvals. There can be no
assurance that the Company will be able to complete pending or future
acquisitions. In order to finance such acquisitions, it may be necessary for the
Company to raise additional funds either through public or private financing.
Debt financing, if available, may be on terms that are unfavorable to the
Company and equity financing may result in significant dilution to the Company's
shareholders.

THE COMPANY'S ACQUISITIONS MAY RESULT IN FINANCIAL RESULTS THAT ARE DIFFERENT
THAN EXPECTED. In the normal course of business, the Company engages in
discussions with third parties relating to possible acquisitions, strategic
alliances, joint ventures, and divestitures. As a result of such transactions,
the Company's financial results may differ from the investment community's
expectations in a given quarter. In addition, acquisitions and strategic
alliances may require the Company to integrate a different company culture,
management team, and business infrastructure. The Company may have difficulty
developing, manufacturing, and marketing the products of a newly acquired
company in a way that enhances the performance of its combined businesses or
product lines to realize the value from expected synergies. Depending on the
size and complexity of an acquisition, the Company's successful integration of
the entity depends on a variety of factors including the retention of key
employees; the management of facilities and employees in separate geographic
areas; the retention of key customers; and the integration or coordination of
different research and development, product manufacturing and sales programs,
and facilities. All of these efforts require varying levels of management
resources that may divert the Company's attention from other business
operations. If the Company does not realize the expected benefits or synergies
of such transactions, its consolidated financial position, results of
operations, and stock price could be negatively impacted.

TECHNOLOGICAL CHANGE COULD CAUSE THE COMPANY'S PRODUCTS TO BECOME
NON-COMPETITIVE OR OBSOLETE. The market for the Company's products and services
is characterized by rapid and significant technological change and evolving
industry standards. New product introductions responsive to these factors
require significant planning, design, development, and testing at the
technological, product, and manufacturing process levels, and may render
existing products and technologies noncompetitive or obsolete. There can be no
assurance that the Company's products will not become noncompetitive or
obsolete. In addition, industry acceptance of new technologies developed by the
Company may be slow to develop due to, among other things, existing regulations
that apply specifically to older technologies and the general unfamiliarity of
users with new technologies.

CONSOLIDATION IN THE ENVIRONMENTAL INSTRUMENT MARKET AND CHANGES IN
ENVIRONMENTAL REGULATIONS COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS. One of
the important markets for the Company's products is environmental analysis.
During the past five years, there has been a contraction in the market for
analytical instruments used for environmental analysis. This contraction has
caused consolidation in the companies serving this market. Such consolidation
may have an adverse impact on certain businesses of the Company. In addition,
most air, water, and soil analyses are conducted to comply with federal, state,
local, and foreign environmental regulations. These regulations are frequently
specific as to the type of technology required for a particular analysis and the
level of detection required for that analysis. The Company develops, configures,
and markets its products to meet customer needs created by existing and
anticipated environmental regulations. These regulations may be amended or
eliminated in response to new scientific evidence or political or economic
considerations. Any significant change in environmental regulations could result
in a reduction in demand for the Company's products.

REDUCED CAPITAL SPENDING OF THE COMPANY'S CUSTOMERS COULD HARM ITS BUSINESS. The
Company's customers include various government agencies and public and private
research institutions, which accounted for 17% of the Company's sales in 2002,
as well as pharmaceutical and chemical companies and laboratories. The capital
spending of these entities can have a significant effect on the demand for the
Company's products. Such spending is based on a wide variety of factors,
including the resources available to make purchases, the spending priorities
among various

21

types of equipment, public policy, political trends, and the effects of
different economic cycles. Any decrease in capital spending by any of the
customer groups, which account for a significant portion of the Company's sales,
could have a material adverse effect on the Company's business and results of
operations.

THE COMPANY'S RESULTS OF OPERATIONS ARE DEPENDENT ON ITS RELATIONSHIP WITH
AGILENT. As previously discussed, the Company anticipates that sales under its
OEM agreement with Agilent will not be consistent with the Company's sales in
prior years under its previous VAR agreement. The OEM agreement is renewable on
an annual basis, and there is no assurance that it will be renewed in future
years. Failure to renew the agreement would place at risk a substantial part of
the Company's sales of GC systems and would have a material adverse effect on
its financial condition and results of operations.

COMPLIANCE WITH GOVERNMENTAL REGULATIONS COULD SUBJECT THE COMPANY TO
SIGNIFICANT EXPENSE. The Company has agreements relating to the sale of products
to government entities and is subject to various statutes and regulations that
apply to companies doing business with the government. The Company is also
subject to investigation for compliance with the terms of government contracts
and non-compliance although inadvertently may result in legal proceedings or
liability, which may be significant. Several of the Company's product lines are
subject to significant international, federal, state, local, health, safety,
packaging, product content, and labor regulations. In addition, many of the
Company's products are regulated or sold into regulated industries, requiring
compliance with additional regulations in marketing these products. Significant
expenses may be incurred to comply with these regulations or remedy past
violations of these regulations. Any failure to comply with applicable
government regulations could also result in cessation of portions or all of the
Company's operations, impositions of fines, and restrictions on the ability to
carry on or expand operations.

ENVIRONMENTAL CONTAMINATION CAUSED BY ONGOING OPERATIONS COULD SUBJECT THE
COMPANY TO SUBSTANTIAL LIABILITIES IN THE FUTURE. Some of the Company's
manufacturing processes involve the use of substances regulated under various
international, federal, state, and local laws governing the environment. The
Company could be subject to liabilities for environmental contamination, and
these liabilities may be substantial. Although the Company's policy is to apply
strict standards for environmental protection at its sites inside and outside
the United States, even if not subject to regulations imposed by foreign
governments, the Company may not be aware of all conditions that could subject
it to liability.

COMPLIANCE WITH GOVERNMENTAL REGULATIONS MAY CAUSE THE COMPANY TO INCUR
SIGNIFICANT EXPENSES, AND FAILURE TO MAINTAIN COMPLIANCE WITH CERTAIN
GOVERNMENTAL REGULATIONS MAY HAVE A NEGATIVE IMPACT ON THE COMPANY'S BUSINESS
AND RESULTS OF OPERATIONS. The Company's business is subject to various
significant international, federal, state, and local, health and safety,
packaging, product content, and labor regulations. These regulations are
complex, change frequently and have tended to become more stringent over time.
For example, the Company's chemical analysis products are used in the drug
design and production processes to test compliance with the Toxic Substances
Control Act, the Food, Drug, and Cosmetic Act, and similar regulations.
Therefore, the Company must continually adapt its chemical analysis products to
changing regulations. The Company may be required to incur significant expenses
to comply with these regulations or to remedy violations of these regulations.
Any failure by the Company to comply with applicable government regulations
could also result in cessation of its operations or portions of its operations,
product recalls or impositions of fines and restrictions on its ability to carry
on or expand its operations. In addition, because many of the Company's products
are regulated or sold into regulated industries, it must comply with additional
regulations in marketing its products.

The Company's products and operations are also often subject to the rules of
industrial standards bodies, like the International Standards Organization, as
well as regulation of other agencies such as the U. S. Federal Communications
Commission. The Company also must comply with work safety rules. If the Company
fails to adequately address any of these regulations, its business will be
harmed.

ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES COULD
ADVERSELY AFFECT THE COMPANY'S RESULTS OF OPERATIONS. Sales outside the U. S.
accounted for approximately 25% of the Company's revenues in 2002. The Company
expects that international sales will continue to account for a significant
portion of the Company's revenues in the future. Sales to the Company's
international customers are subject to a number of risks including

22

interruption to transportation flows for delivery of finished goods to its
customers; changes in foreign currency exchange rates; changes in a specific
country's or region's political or economic conditions; trade protection
measures and import or export licensing requirements; negative consequences from
changes in tax laws; differing protection of intellectual property; and
unexpected changes in regulatory requirements. There can be no assurance that
any of these factors will not have a material adverse effect on the Company's
business and results of operations.

THE COMPANY FACES COMPETITION FROM THIRD PARTIES IN THE SALE OF ITS PRODUCTS.
The Company encounters and expects to continue to encounter intense competition
in the sale of its products. The Company believes that the principal competitive
factors affecting the market for its products include product performance,
price, reliability, and customer service. The Company's competitors include
large multinational corporations and operating units of such corporations. Most
of the Company's competitors have substantially greater financial, marketing,
and other resources than those of the Company. Therefore, they may be able to
adapt more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the promotion and sale of their
products than the Company. In addition, competition could increase if new
companies enter the market or if existing competitors expand their product lines
or intensify efforts within existing product lines. There can be no assurance
that the Company's current products, products under development or ability to
discover new technologies will be sufficient to enable it to compete effectively
with its competitors.

THE COMPANY COULD INCUR SUBSTANTIAL COSTS IN PROTECTING AND DEFENDING ITS
INTELLECTUAL PROPERTY, AND LOSS OF PATENT RIGHTS COULD HAVE A MATERIAL ADVERSE
EFFECT ON THE COMPANY'S BUSINESS. The Company holds patents relating to various
aspects of its products and believes that proprietary technical know-how is
critical to many of its products. Proprietary rights relating to the Company's
products are protected from unauthorized use by third parties only to the extent
that they are covered by valid and enforceable patents or are maintained in
confidence as trade secrets. There can be no assurance that patents will issue
from any pending or future patent applications owned by or licensed to the
Company or that the claims allowed under any issued patents will be sufficiently
broad to protect the Company's technology. In the absence of patent protection,
the Company may be vulnerable to competitors who attempt to copy the Company's
products or gain access to its trade secrets and technical know-how. Proceedings
initiated by the Company to protect its proprietary rights could result in
substantial costs to the Company. There can be no assurance that competitors of
the Company will not initiate litigation to challenge the validity of the
Company's patents, or that they will not use their resources to design
comparable products that do not infringe upon the Company's patents. There may
also be pending or issued patents held by parties not affiliated with the
Company that relate to the Company's products or technologies. The Company may
need to acquire licenses to, or contest the validity of, any such patents. There
can be no assurance that any license required under any such patent would be
made available on acceptable terms or that the Company would prevail in any such
contest. The Company could incur substantial costs in defending itself in suits
brought against it or in suits in which the Company may assert its patent rights
against others. If the outcome of any such litigation is unfavorable to the
Company, the Company's business and results of operations could be materially
and adversely affected. In addition, the Company relies on trade secrets and
proprietary technical know-how that it seeks to protect, in part, by
confidentiality agreements with its collaborators, employees, and consultants.
There can be no assurance that these agreements will not be breached, that the
Company would have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or be independently developed by
competitors.

THE COMPANY'S FLUCTUATING QUARTERLY OPERATING RESULTS MAY NEGATIVELY IMPACT
STOCK PRICE. The Company cannot reliably predict future revenue and
profitability, and unexpected changes may cause adjustments to the Company's
operations. Since a high proportion of the Company's costs are fixed, due in
part to significant cost to maintain customer support, research and development
and manufacturing costs, relatively small declines in revenues could
disproportionately affect the Company's quarterly operating results, and in
turn, cause declines in the Company's stock price. Other factors that could
affect quarterly operating results include lower demand for and market
acceptance of products due to adverse changes in economic activity or conditions
in the Company's major markets; lower selling prices due to competitive
pressures; unanticipated delays, problems, or increased costs in the
introduction of new products or manufacture of existing products; changes in the
relative portion of revenue represented by the Company's various products and
customers; and competitors' announcements of new products,

23

services or technological innovations. Any one of these factors, individually or
any combination, could cause the stock price of the Company to fluctuate
greatly.

ALTHOUGH INFLATION HAS NOT HAD A MATERIAL IMPACT ON THE COMPANY'S OPERATIONS,
THERE IS NO ASSURANCE THAT INFLATION WILL NOT ADVERSELY AFFECT ITS OPERATIONS IN
THE FUTURE. The Company believes that competition based on price is a
significant factor affecting its customers' buying decisions. There is no
assurance that the Company can pass along cost increases in the form of price
increases or sustain profit margins that have been achieved in prior years. The
prices of some components purchased by the Company have increased in the past
several years due in part to decreased volume. Certain other material and labor
costs have also increased, but the Company believes that these increases are
approximately consistent with overall inflation rates. Competing companies are
larger, better trained, and they cover larger areas geographically.

FAILURE OF SUPPLIERS TO DELIVER SUFFICIENT QUANTITIES OF PARTS IN A TIMELY
MANNER COULD CAUSE THE COMPANY TO LOSE SALES AND, IN TURN, ADVERSELY AFFECT THE
COMPANY'S RESULTS OF OPERATIONS. The Company may be materially and adversely
impacted if sufficient parts are not received in time to meet manufacturing
requirements. Factors that may result in manufacturing delays include certain
parts may be available only from a single supplier or a limited number of
suppliers; key components may become unavailable and may be difficult to replace
without significant reengineering of the Company's products; suppliers may
extend lead times, limit supplies, or increase prices due to capacity
constraints or other factors. Should the Company reduce purchase orders to its
suppliers and its sales increase rapidly, its suppliers may not react quickly
enough or may refuse to expedite shipments of parts to use because of the
Company's previous reduction in requirements. If sufficient parts are not
received in time to meet manufacturing requirements, then the Company will not
be able to meet its obligations to deliver goods to its customers and may cause
the Company to lose sales.

THE COMPANY'S INABILITY TO ADJUST ITS ORDERS FOR PARTS OR ADAPT ITS
MANUFACTURING CAPACITY IN RESPONSE TO CHANGING MARKET CONDITIONS COULD ADVERSELY
AFFECT THE COMPANY'S EARNINGS. The Company's earnings could be harmed if it is
unable to adjust its orders for parts to respond to market fluctuations. In
order to secure components for the production of products, the Company may enter
into non-cancelable purchase commitments with vendors, or at times make advance
payments to suppliers, which could impact its ability to adjust its inventory to
declining market demands. Prior commitments of this type have resulted in an
excess of parts as demand for certain of the Company's products has decreased.
If the demand for the Company's products continues to decrease, it may
experience an excess of parts and be forced to incur additional charges. Certain
parts may be available only from a single supplier or a limited number of
suppliers. In addition, suppliers may cease manufacturing certain components
that are difficult to substitute without significant reengineering of the
Company's products. Suppliers may also extend lead times, limit supplies, or
increase prices due to capacity constraints or other factors.

Additionally, because the Company cannot immediately adapt its production
capacity and related cost structures to rapidly changing market conditions, when
demand does not meet the Company's expectations, its manufacturing capacity will
likely exceed its production requirements.

IF THE COMPANY SUFFERS LOSS TO OUR FACILITIES OR DISTRIBUTION SYSTEM DUE TO
CATASTROPHE, OUR OPERATIONS COULD BE SERIOUSLY HARMED. Our facilities and
distribution system are subject to catastrophic loss due to fire, flood,
terrorism, or other natural or man-made disasters. Our production facilities and
corporate headquarters are located in College Station, Texas, and our production
facilities in Alabama. If any of these facilities were to experience a
catastrophic loss, it could disrupt our operations, delay production, shipments,
and revenue and result in large expenses to repair or replace the facility.
Although we carry insurance for property damage and business interruption, we do
not carry insurance or financial reserves for interruptions or potential losses
arising from earthquakes or terrorism.

IF WE ARE REQUIRED TO ACCOUNT FOR OPTIONS UNDER OUR EMPLOYEE STOCK PLANS AS A
COMPENSATION EXPENSE, OUR NET INCOME AND EARNINGS PER SHARE WOULD BE
SIGNIFICANTLY REDUCED. There has been an increasing public debate about the
proper accounting treatment for employee stock options. Currently we record
compensation expense only in connection with option grants that have an exercise
price below fair market value. For option grants that have an exercise price at
or in excess of fair market value, we calculate compensation expense and
disclose the impact on

24

net (loss) earnings and net (loss) earnings per share in a footnote to the
consolidated financial statements. It is possible that future laws and
regulations will require us to record the fair market value of all stock options
as compensation expense in our consolidated statement of operations. Note 8,
"Stock Option and Stock Purchase Plans," of the consolidated financial
statements included in this report reflects the impact that such a change in
accounting treatment would have had on our net income and earnings per share if
it had been in effect during the past three years.

IF OUR OPERATING RESULTS DO NOT IMPROVE IN THE LONG-TERM, WE MAY BE REQUIRED TO
ESTABLISH A VALUATION ALLOWANCE AGAINST OUR NET DEFERRED TAX ASSETS. We evaluate
whether our deferred tax assets can be realized and assess the need for a
valuation allowance on an ongoing basis. Realization of our net deferred tax
assets is dependent on our ability to generate future taxable income. A
valuation allowance would be recorded if it was more likely than not that some
or all of our deferred tax assets would not be realized before they expire. If
we establish a valuation allowance, we might record a tax expense in our
statements of income, which would have an adverse impact on our net income.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK The Company is exposed to a variety of market risks, including
changes in interest rates and the market value of its investments. In the normal
course of business, the Company employs established policies and procedures to
manage its exposure to changes in the market value of its investments. To date,
the Company has not experienced any material effects to its financial position
or results of operations due to market risks or its efforts to manage market
risks.

The fair value of the Company's investments in debt and equity securities at
December 31, 2002, 2001, and 2000 was $3,733,184, $1,926,769, and $1,437,503,
respectively. See Note 1 of the Company's financial statements for further
information regarding these investment instruments. The Company's investment
policy is to manage its investment portfolio to preserve principal and liquidity
while maximizing the return on the investment portfolio by investing in multiple
types of investment grade securities. The Company's investment portfolio is
primarily invested in short-term securities, with at least an investment grade
rating to minimize credit risk, and preferred stocks. Although changes in
interest rates may affect the fair value of the investment portfolio and cause
unrealized gains or losses, such gains or losses would not be realized unless
the investments were sold.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING Management is responsible for
the integrity and objectivity of the data included in this report. Management
believes it has provided financial information (both audited and unaudited) that
is representative of the Company's operations, reliable on a consistent basis
throughout the periods presented, and relevant for a meaningful appraisal of the
Company. The financial statements have been prepared in accordance with
generally accepted accounting principles. Where necessary, they reflect
estimates based on management's judgment.

Established accounting procedures and related systems of internal control
provide reasonable assurance that assets are safeguarded, that the books and
records properly reflect all transactions, and that qualified personnel
implement policies and procedures. Management periodically reviews the Company's
accounting and control systems.

The Company's Audit Committee, composed of at least four members of the Board of
Directors who are not employees of the Company, meets regularly with
representatives of management and the independent accountants to monitor the
functioning of the accounting and control systems and to review the results of
the audit performed by the independent accountants. The independent accountants
and Company employees have full and free access to the Audit Committee without
the presence of management.

By authority of the Board of Directors, the Audit Committee has full authority
and responsibility to oversee the appointment, termination, funding, evaluation,
and independence of the independent auditors engaged by the Company.

The independent accountants conduct an objective, independent examination of the
financial statements. Their report appears as a part of this Annual Report on
Form 10-K.

25

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF O.I. CORPORATION:

We have audited the accompanying consolidated balance sheet of O.I. Corporation
(an Oklahoma corporation) and subsidiaries as of December 31, 2002, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of O.I. Corporation and
subsidiaries as of December 31, 2002, and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

GRANT THORNTON LLP
Houston, Texas
February 28, 2003

26

REPORT OF INDEPENDENT ACCOUNTANTS

THE BOARD OF DIRECTORS AND STOCKHOLDERS OF O. I. CORPORATION

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of O. I. Corporation
and its subsidiaries at December 31, 2001, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
February 15, 2002

27

O. I. CORPORATION
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

28

O. I. CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these financial statements.

29

O. I. CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

30

O. I. CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these financial statements.

31

O. I. CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

O. I. Corporation, an Oklahoma corporation, was organized in 1969. O.I.
Corporation designs, manufactures, markets, and services analytical, monitoring,
and sample preparation products, components, and systems used to detect,
measure, and analyze chemical compounds.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and include the accounts of O.I. Corporation and its
wholly owned subsidiary, (collectively, the "Company"). All significant
intercompany transactions and balances have been eliminated in the consolidated
financial statements.

REVENUE RECOGNITION The Company derives revenues from three sources--system
sales, parts sales, and services. For system sales and parts sales, revenue is
generally recognized when persuasive evidence of an arrangement exists, delivery
has occurred, the contract price is fixed or determinable, title and risk of
loss has passed to the customer and collection is reasonably assured. The
Company's sales are typically not subject to rights of return and, historically,
sales returns have not been significant. System sales that do not involve unique
customer acceptance terms or new specifications or technology with customer
acceptance provisions, and that involve installation services are accounted for
as multiple-element arrangements, where the larger of the contractual billing
hold back or the fair value of the installation service is deferred when the
product is delivered and recognized when the installation is complete. In all
cases, the fair value of undelivered elements, such as accessories ordered by
customers, is deferred until the related items are delivered to the customer.
For certain other system sales that do involve unique customer acceptance terms
or new specifications or technology with customer acceptance provisions, all
revenue is generally deferred until customer acceptance. Deferred revenue from
such system sales is presented, net of related deferred cost of sales, as
unearned revenues in accrued liabilities in the accompanying consolidated
balance sheets. Revenues from services are recognized upon provision of service
to the customer.

Our products generally carry one year of warranty. Once the warranty period has
expired, the customer may purchase an extended product warranty typically
covering an additional period of one year. Extended warranty billings are
generally invoiced to the customer at the beginning of the contract term.
Revenue from extended warranties is deferred and recognized ratably over the
duration of the contract. Unearned extended warranty revenue is included in
deferred revenues in accrued liabilities in the accompanying consolidated
balance sheets.

Revenues from bill and hold sales are recognized in accordance with the criteria
specified in SAB 101. In addition to the criteria above, the customer must
request that the transaction be on a bill and hold basis and have a substantial
business purpose for ordering the goods on that basis, there must be a
reasonable, fixed schedule for delivery consistent with the business purpose,
the Company must no longer retain any performance obligations and the earnings
process must be substantially complete, and the items sold are segregated from
the rest of the Company's inventory and must be ready for final shipment to the
customer.

CASH AND CASH EQUIVALENTS The Company considers all highly liquid cash
investment instruments with an original maturity of three months or less to be
cash equivalents.

INVESTMENTS The Company accounts for its investments that represent less than
twenty percent ownership using Statement of Financial Accounting Standards No.
115 (FAS 115), Accounting for Certain Investments in Debt and Equity Securities.
This standard requires that certain debt and equity securities be adjusted to
market value at the end of each accounting period. The Company invests in debt
securities and preferred stocks. The Company's

32

investments in debt securities are classified as held-to-maturity as the Company
has the positive intent and ability to hold the investments until maturity.
Company investments in bonds are reported at amortized cost. The Company's
investments as of December 31, 2002 and 2001 consisted entirely of preferred
stock investments. These investments were classified as available-for-sale and
are stated at fair value at December 31, 2002 and 2001. The unrealized gain
(loss) on preferred stock is reported net of tax as accumulated other
comprehensive income (loss) in the accompanying consolidated statements of
stockholders' equity. Realized gains and losses on sales of investments are
included in the consolidated statements of income.

INVESTMENT IN SALES-TYPE LEASES The Company's leasing operations consist of the
leasing of analytical instruments. The majority of the Company's leases are
classified as sales-type leases. These leases typically expire over a four-year
period. The Company recognizes as revenues the principal portion of sales-type
leases upon initiation of the lease. Interest is deferred and recognized as
revenues over the initial term of the lease. Security deposits are deferred
until the lease expires and either recognized as revenues or returned to the
customer, as appropriate.

INVENTORIES Inventories consist of electronic equipment and various components
and are stated at the lower of cost or market. Cost is determined on a first-in,
first-out basis. The Company maintains a reserve for inventory obsolescence and
regularly evaluates its inventory. Items with no movement in six months or more
are reserved or written off. The Company also provides an obsolescence reserve
for items that have impairments in their realizable value below cost.

DEMONSTRATION EQUIPMENT The demonstration of the Company's products is often
required prior to a customer's purchase. The Company makes available certain
equipment for use in demonstrations believing that a successful demonstration
will promote the customer's purchase of the equipment. Equipment used in
demonstration is classified as inventory and is depreciated to a zero value in a
six-month period from the date of being used in a customer demonstration.
Product shipments, including those for demonstration or evaluation, are not
recorded as revenues until a valid purchase order is received specifying fixed
terms and prices.

PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is recorded at
cost and depreciated over the estimated useful lives of 3 to 40 years using the
straight-line method. Repairs and maintenance are expensed as incurred.

INTANGIBLE ASSETS Intangible assets primarily include acquired patents, trade
names and trademarks, manufacturing rights and know-how that is amortized on a
straight-line basis over their estimated useful lives as follows.

US GAAP requires that long-lived assets to be held and used, including
intangible assets, be reviewed for impairment whenever changes in circumstances
indicate the carrying value may not be recoverable. The carrying value is
considered impaired when the anticipated separately identifiable undiscounted
cash flows from such an asset are less than the carrying value of the asset. In
that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair value of the long-lived asset.

PRODUCT WARRANTIES Products are sold with warranties ranging from 90 days to one
year. Estimated expenses associated with these warranties are provided for at
the time of revenue recognition in the accompanying consolidated financial
statements. The Company makes estimates of these costs based on historical
experience and on various other assumptions including historical and expected
product failure rates, material usage, and service delivery costs incurred in
correcting a product failure.

RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as
incurred.

INCOME TAXES The Company provides for deferred taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which requires the Company to use the asset and liability approach to
account for income taxes. This approach requires the recognition of deferred
income tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities. The provision for income taxes is based on income before income
taxes as reported in the accompanying consolidated statements of income.

CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject
the Company to concentrations of credit risk, consist principally of investments
and trade receivables. The Company places its available cash in money market

33

funds, investment grade domestic corporate bonds, and highly-rated corporate
preferred stocks. The Company's investments are subject to fluctuations based on
interest rates and trading conditions prevailing in the marketplace. The Company
sells its products primarily to large corporations, environmental testing
laboratories, and governmental agencies. The majority of its customers are
located in the U. S. and all sales are denominated in U.S. dollars. Credit risk
with respect to trade receivables is limited due to the financial stability of
the customers comprising the Company's customer base. The Company performs
ongoing credit evaluations of its customers to minimize credit risk. As of
December 31, 2002 and 2001, the Company had no significant concentrations of
credit risk related to accounts receivable. However, agencies of the U.S.
government constitute a significant percentage of the Company's revenues (See
Note 13). Any federal budget cuts or changes in regulations affecting the U.S.
chemical warfare programs or the USEPA may have a negative impact on the
Company's future revenues.

EARNINGS PER SHARE The Company reports both basic earnings per share, which is
based on the weighted average number of common shares outstanding, and diluted
earnings per share, which is based on the weighted average number of common
shares outstanding and all dilutive potential common shares outstanding. Stock
options are the only dilutive potential shares the Company has outstanding. The
weighted average of shares used in the basic earnings per share calculation was
2,755,634 in 2002, 2,659,844 in 2001, and 2,895,615 in 2000. The weighted
average number of shares used in the diluted earnings per share computation was
2,778,478 in 2002, 2,701,784 in 2001, and 2,896,841 in 2000. At December 31,
2002, 2001 and 2000, options to acquire 133,700, 128,900, and 260,600 shares at
weighted average exercise prices of $5.88, $6.85, and $5.39, respectively, were
not included in the computations of dilutive earnings per share as the options'
exercise price was greater than the average market price of the common shares.

COMPREHENSIVE INCOME (LOSS) Effective January 1, 1998, the Company adopted
Statement No. 130 (FAS 130), Reporting Comprehensive Income. This Statement
established standards for reporting and display of comprehensive income and its
components. Net income and unrealized gains and losses on available-for-sale
investments are the Company's only components of comprehensive income (loss).

STOCK BASED COMPENSATION At December 31, 2002, the Company has three stock-based
employee compensation plans, which are described more fully in Note 8. The
company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations. No stock-based employee compensation cost is reflected
in net income, as all options granted under those plans had an exercise price
equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share
if the company had applied the fair value recognition provisions of FAS
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used for
grants in 2002, 2001, and 2000, respectively: dividend yield of zero for each
year; expected volatility of 37, 37, and 33 percent; risk-free interest rates of
1.30, 6.38, and 6.38 percent; and expected lives

34

of seven years. The weighted average fair value at the date of grant for options
granted during 2002, 2001, and 2000 was $2.09, $1.90, and $1.90, respectively.

USE OF ESTIMATES The preparation of the consolidated financial statements in
accordance with accounting principles generally accepted in the U.S. requires
the use of management's estimates. These estimates are subjective in nature and
involve judgments that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at year end, and the
reported amounts of revenues and expenses during the year. Actual results could
differ from those estimates.

RECLASSIFICATIONS Certain prior period amounts in the consolidated financial
statements have been reclassified for comparative purposes. Such
reclassifications had no effect on the net income or the overall financial
condition of the Company.

RECENT PRONOUNCEMENTS In September 2000, the FASB issued Statement No. 140 (FAS
140), Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. This Statement replaces FAS 125, issued in June
of 1996. The new Statement will be effective for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000, and for transfers occurring after March 31, 2001. Adoption of
FAS 140 did not have a material effect on the Company's financial position or
operating results.

In June 2001, the FASB issued Statement No. 141 (FAS 141), Business
Combinations. FAS 141 requires that all business combinations completed after
June 30, 2001, be accounted for under the purchase method, eliminating the use
of the pooling method. This Statement also establishes for all business
combinations made after June 30, 2001, specific criteria for the recognition of
intangible assets separately from goodwill. FAS 141 also requires that the
excess of fair value of acquired assets over cost in a business combination
(negative goodwill) be recognized immediately as an extraordinary gain, rather
than deferred and amortized.

In June 2001, the FASB issued Statement No. 142 (FAS 142), Goodwill and Other
Intangibles. FAS 142 addresses the accounting for goodwill and other intangible
assets after an acquisition. The most significant changes made by FAS 142 are
goodwill and intangible assets with indefinite lives will no longer be
amortized; goodwill and intangible assets with indefinite lives must be tested
for impairment at least annually; and the amortization period for intangible
assets with finite lives will no longer be limited to forty years. The Company
adopted FAS 142 effective January 1, 2002, as required. A transitional
impairment test was required for existing goodwill as of the date of adoption of
this Standard; however, the Company did not have any goodwill on its books.
Goodwill recorded after adoption of this Standard is to be tested for impairment
at least annually and any resulting impairment is considered part of operating
income.

In June 2001, the FASB issued Statement No. 143 (FAS 143), Accounting for
Obligations Associated with the Retirement of Long-Lived Assets. FAS 143
establishes a new accounting model for the recognition and measurement of
retirement obligations associated with tangible long-lived assets. FAS 143
requires that an asset retirement cost should be capitalized as part of the cost
of the related long-lived asset and subsequently allocated to expense using a
systematic and rational method. The Company adopted this Statement effective
January 1, 2003. Adoption of this Statement did not have a material effect on
the Company's financial position and results of operations.

In August 2001, the FASB issued Statement No. 144 (FAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assets, which establishes one accounting
model to be used for long-lived assets to be disposed of by sale and broadens
the presentation of discontinued operations to include more disposal
transactions. FAS 144 supersedes FAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions of APB Opinion No. 30. FAS No. 144 is
effective for fiscal years beginning after December 15, 2001. During the third
quarter ended September 30, 2002, the Company performed an evaluation of future
prospects of certain products and their related intangible assets. As a result
of this evaluation, the Company recorded an impairment loss for those intangible
assets totaling approximately $346,000 (See Note 5).

35

In April 2002, the FASB issued FAS 145, Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections, which is
effective for transactions occurring after May 15, 2002. FAS 145 rescinds FAS 4
and FAS 64, which addressed the accounting for gains and losses from
extinguishment of debt. FAS 44 set forth industry-specific transitional guidance
that did not apply to the Company. FAS 145 amends FAS 13 to require that certain
lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
FAS 145 also makes technical corrections to certain existing pronouncements that
are not substantive in nature. The adoption of FAS 145 in the second quarter of
fiscal year 2002 did not have a significant impact on the Company's financial
condition or results of operations.

In July 2002, the FASB issued FAS 146, Accounting for Exit or Disposal
Activities. FAS 146 addresses the recognition, measurement, and reporting of
costs associated with exit and disposal activities, including restructuring
activities that are currently accounted for pursuant to the guidance set forth
in Emerging Issues Task Force issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other costs to Exit an Activity (including
Certain Costs Incurred in Restructuring). The Scope of FAS 146 includes costs
related to terminating a contract that is not a capital lease, costs to
consolidate facilities or relocate employees, and certain termination benefits
provided to employees who are involuntarily terminated. FAS 146 is effective for
exit or disposal activities initiated after December 31, 2002. The Company does
not expect the adoption of FAS 146 to have a significant impact on its financial
condition or results of operations.

In 2003, the FASB, issued FAS 148, Accounting for Stock-Based Compensation
Transition and Disclosure, an amendment of FAS 123. The disclosure requirements
of FAS 123, Accounting for Stock-Based Compensation, which apply to stock
compensation plans of all companies, are amended to require certain disclosures
about stock-based employee compensation plans in an entity's accounting policy
note. Those disclosures include a tabular format of pro forma net income and, if
applicable, earnings per share under the fair value method if the intrinsic
value method is used in any period presented. Pro forma information in a tabular
format is also required in the notes to interim financial information if the
intrinsic value method is used in any period presented. The amendments to the
disclosure and transition provisions of FAS 123 are effective for fiscal years
ending after December 15, 2002. The Company does not plan a change to the fair
value based method of accounting for stock-based employee compensation and has
included the disclosure requirements of FAS 148 in the accompanying financial
statements.

In November 2002, the Emerging Issues Task Force reached a consensus opinion on
EITF 00-21, "Revenue Arrangements with Multiple Deliverables." The consensus
provides that revenue arrangements with multiple deliverables should be divided
into separate units of accounting if certain criteria are met. The consideration
for the arrangement should be allocated to the separate units of accounting
based on their relative fair values, with different provisions if the fair value
of all deliverables are not known or if the fair value is contingent on delivery
of specified items or performance conditions. Applicable revenue recognition
criteria should be considered separately for each separate unit of accounting.
EITF 00-21 is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. Entities may elect to report the change as a
cumulative effect adjustment in accordance with APB Opinion 20, Accounting
Changes. The Company has not determined the effect of adoption of EITF 00-21 on
its financial statements or the method of adoption it will use.

In November 2002, the Emerging Issues Task Force reached a consensus opinion on
EITF 02-16, "Accounting by a Customer (including a reseller) for Certain
Consideration Received from a Vendor." EITF 02-16 requires that cash payments,
credits, or equity instruments received as consideration by a customer from a
vendor should be presumed to be a reduction of cost of sales when recognized by
the customer in the income statement. In certain situations, the presumption
could be overcome and the consideration recognized either as revenue or a
reduction of a specific cost incurred. The consensus should be applied
prospectively to new or modified arrangements entered into after December 31,
2002. The Company has not yet determined the effects of EITF 02-16 on its
financial statements.

In November 2002, FASB Interpretation 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45), was issued. FIN 45 requires a guarantor entity, at the
inception of a guarantee covered by the measurement provisions of the
interpretation, to record a liability for

36

the fair value of the obligation undertaken in issuing the guarantee. FIN 45
applies prospectively to guarantees the Company issues or modifies subsequent to
December 31, 2002, but has certain disclosure requirements effective for interim
and annual periods ending after December 15, 2002. The Company has historically
issued guarantees only on in the form of product warranties and does not
anticipate FIN 45 will have a material effect on its 2003 financial statements.
Disclosures required by FIN 45 are included in the accompanying financial
statements.

In January 2003, the FASB issued FASB Interpretation 46 (FIN 46), Consolidation
of Variable Interest Entities. FIN 46 clarifies the application of Accounting
Research Bulletin 51, Consolidated Financial Statements, for certain entities
that do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties,
or in which equity investors do not have the characteristics of a controlling
financial interest ("variable interest entities"). Variable interest entities
within the scope of FIN 46 will be required to be consolidated by their primary
beneficiary. The primary beneficiary of a variable interest entity is determined
to be the party that absorbs a majority of the entity's expected losses,
receives a majority of its expected returns, or both. FIN 46 applies immediately
to variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date. It
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The Company is in the process
of determining what impact, if any, the adoption of the provisions of FIN 46
will have upon its financial condition or results of operations.

NOTE 2. NET INVESTMENT IN SALES-TYPE LEASES

The following lists the components of the net investment in sales-type leases as
of December 31:

At December 31, 2002, minimum lease payments for each of the five succeeding
fiscal years are as follows: $277,923 in 2003, $143,587 in 2004, $82,652 in
2005, $44,881 in 2006, and $0 in 2007.

NOTE 3. INVENTORIES

Inventories, which include material, labor, and overhead, on December 31, 2002
and 2001, consisted of the following:

37

NOTE 4. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment on December 31, 2002 and 2001, consisted of the
following:

Depreciation expenses totaled $449,108 and $460,205 for the years ended December
31, 2002 and 2001, respectively.

NOTE 5. INTANGIBLE ASSETS

Intangible assets on December 31, 2002 and 2001, consisted of the
following:

Amortization charged to operations amounted to approximately $38,209, $132,327,
and $191,000, for the years ended December 31, 2002, 2001, and 2000,
respectively.

Estimated amortization expense:
For year ended 12/31/03 $ 9,614
For year ended 12/31/04 $ 9,614
For year ended 12/31/05 $ 9,614
For year ended 12/31/06 $ 9,614
For year ended 12/31/07 $ 9,614

Consistent with the Company's accounting policies, during 2002, the Company
performed an annual evaluation of the future prospects of certain products and
their related inventory and intangible assets. As a result of this evaluation,
the Company decided to discontinue manufacturing, sales, service, and support
for certain sample preparation, gas chromatography, and ion analyzer products.
The Company came to these decisions because purchase components are no longer
available for support of certain products, and the Company's current or
anticipated sales volume for certain other products no longer represent a viable
business opportunity for the Company.

38

As a result of the determination to discontinue these products, the Company
recorded an impairment loss for intangible assets and a loss for obsolete
inventory related to those products. The impaired intangible assets consisted of
acquired trade names and trademarks that are no longer used to market the
Company's products, application notes for products that are no longer produced
or sold, and patents on technology that is no longer used in the Company's
products. To determine if any impairment existed, the Company compared the
carrying amount of each intangible asset, separately, to the undiscounted cash
flow stream over the remaining life of each intangible asset. To value the
indicated impairment, the Company compared the carrying amount of each
intangible asset, separately, to the fair value of those intangible assets. The
Company determined the fair value of each intangible asset by estimating the
future cash flows from the use and disposition of those intangible assets. The
aggregate fair value of those intangible assets was less than the aggregate
carrying value and resulted in an impairment loss totaling approximately
$346,000, which is included in SG&A expense in the consolidated statements of
income.

The loss for obsolete inventory was determined by taking the total of the
inventory related to these discontinued products and consistent with the
Company's policy relating to obsolete inventory, the total of other inventory
with no movement in six months, which the Company determined is no longer
saleable based on available market information. The loss for obsolete inventory
totaled approximately $200,000, and is included in cost of goods sold in the
consolidated statements of income.

On February 1, 1999, the Company acquired substantially all of the assets of
General Analysis Corporation (GAC). GAC is a supplier of beverage monitors used
to measure dissolved Brix (sugar), diet syrup and carbon dioxide in beverage
streams. Assets acquired also included air and gas monitors that are used by the
chiller/refrigerant industry for the rapid detection of low-level refrigerant
leaks. The excess of the purchase price over fair market value of the underlying
assets acquired of $1,078,000 was allocated to intangibles, including patents,
non-compete agreements, trademarks, and goodwill based upon estimates of
relative fair values. The intangible assets were being amortized over a 5 to 15
year period, dependent upon the nature of the assets and are included within the
other intangible assets caption of the consolidated balance sheets. In the
fourth quarter of 2000, the Company performed an analysis of intangible assets
related to the acquisition of GAC and for a GC inlet product for which the
manufacturing rights were acquired in 1999 and determined that part of the
carrying value of these assets was not recoverable due to continuous delays in
the introduction of a new product, resulting in deterioration of market
presence. The Company evaluated the realizability of the intangible assets based
on expectations of non-discounted cash flows and operating income for each
product line having a material intangible asset balance. An impairment loss was
recognized as the estimated future undiscounted cash flows expected to result
from the use of the asset and its eventual disposition was less than its
carrying amount. The impairment loss was measured as the difference between the
carrying value of the asset and the discounted cash flows expected to be
produced by the assets. As a result of this analysis, the Company recorded asset
impairment charges in the fourth quarter of 2000 amounting to $960,000 before
tax, which reduced net income by approximately $605,000, or $0.21 per share
(diluted). The asset impairment charges consisted of $793,000 relating to the
value of intangible assets acquired from GAC in February 1999, and $167,000
relating to the value of manufacturing rights acquired in 1999.

NOTE 6. ACCRUED LIABILITIES

Accrued liabilities on December 31, 2002 and 2001, consisted of the following:

39

NOTE 7. PRODUCT WARRANTY LIABILITIES

The changes in the Company's product warranty liability on December 31, 2002 and
2001 are as follows:

NOTE 8. STOCK OPTION AND STOCK PURCHASE PLAN

In 1987, the Company established a stock option and stock appreciation rights
plan (1987 Plan) qualified under Section 422 of the Internal Revenue Code of
1986. The 1987 Plan expired in accordance with its terms on December 31, 1997.
Options granted to purchase 33,766 shares remain outstanding under the 1987 Plan
at December 31, 2002.

During 1992, the Company's Board of Directors, and during 1993, the Company's
stockholders, approved the O. I. Corporation 1993 Incentive Compensation Plan
(1993 Plan). The 1993 Plan provides for the granting of options to purchase up
to 500,000 shares of the Company's common stock with the options having an
exercise price of not less than the par value of such stock. Employees and
non-employee directors of the Company are eligible for such grants. The options
generally expire ten years from the date of grant and generally vest over three
or four years. The 1993 Plan was amended effective January 1, 2001 to also
provide for the one-time award of 6,000 shares to directors upon their initial
election to the Board. During 2001, 24,000 shares were awarded under this
provision resulting in $73,680 in compensation expense. During 2002, the Company
granted 135,000 share options under the 1993 Plan, with a weighted average
exercise price based on the stock price of $5.20 at the date of grant. The 1993
Plan expired in accordance with its terms on December 2002. At such time,
409,134 of the 500,000 shares reserved for issuance had been granted and 90,866
shares expired ungranted.

Both the 1987 Plan and the 1993 Plan allow for the exercise of options with
mature shares. During 2001, 55,237 outstanding mature shares were used to
exercise stock options for 133,060 shares of the Company's stock. Options
outstanding under the 1987 Plan and the 1993 Plan have exercise prices equal to
the market value on the date of grant.

The 2003 Incentive Compensation Plan (the "Incentive Plan") was adopted by the
Board of Directors on February 25, 2002, and approved by the Company's
shareholders at the annual meeting of shareholders on May 6, 2002. The Incentive
Plan became effective on January 1, 2003. Key personnel and non-employee
directors of the Company are eligible to participate in the Incentive Plan. The
purpose of the Incentive Plan is to attract, retain, and motivate key employees
and non-employee directors of the Company by providing additional benefits to
such employee and non-employee directors by way of granting stock options, stock
appreciation rights ("SARs"), stock awards and performance awards. The Incentive
Plan is administered by the Compensation Committee. Members of the Compensation
Committee are not eligible to participate under the Incentive Plan, other than
to receive stock option grants or awards of stock on a formula basis as set
forth in the Plan. The 2003 Plan also provides that each non-employee director
will be awarded 3,000 shares of restricted stock upon his initial election to
the Board of Directors.

The aggregate number of shares of the Company's common stock as to awards may be
granted under the Incentive Plan is 350,000, subject to adjustments as described
in the Incentive Plan; provided, however, that 150,000 shares of Common Stock
shall be reserved for the grant of incentive stock options under the Incentive
Plan. The Incentive Plan terminates on December 31, 2012.

The option price for each stock option is determined by the Compensation
Committee, but in no event may the

40

exercise price per share be less than the market value per share (as defined in
the Plan) on the date of the grant; provided, however, that in the case of an
employee who, at the time an incentive stock option is granted, owns (within the
meaning of Section 424(d) of Code) more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary corporation, then
the exercise price for the incentive stock option shall be at least 110% of the
market value per share of Common Stock at the time of grant.

The Company intends to register shares of Common Stock issuable pursuant to the
Incentive Plan under the Securities Act of 1933, as amended.

Activity under the 1987 Plan and the 1993 Plan for each of the three years in
the period ended December 31, 2002 was as follows:

There were 114,852, 86,766, and 284,050 share options exercisable at December
31, 2002, 2001, and 2000, respectively.

The following table summarizes significant ranges of outstanding and exercisable
options at December 31, 2002:

In 1989, the Company established an Employee Stock Purchase Plan, which the
Board of Directors, in 1998, re-authorized to continue in its same format. Under
the plan provisions, employees may purchase shares of the Company's common stock
on a regular basis through payroll deductions. Any person who is a full-time
employee of the Company is eligible to participate in the plan, with each
participant's purchases limited to 10% of annual gross compensation. The
Compensation Committee of the Board of Directors administers the plan. Shares of
common stock are purchased in the open market or issued from shares held in
treasury. The Company pays all commissions and contributes an additional 15% for
the purchase of shares that are distributed to eligible participating employees.
The

41

Company's contribution to the plan was not significant in any of the years
reported. The aggregate number of shares of common stock available for purchase
under this plan is 200,000. As of December 31, 2002, 55,668 shares had been
purchased under the plan.

NOTE 9. STOCKHOLDERS' EQUITY

The Company's Articles of Incorporation authorize the issuance of up to
3,000,000 shares of preferred stock with $0.10 par value per share. The voting
rights, dividend rate, redemption price, rights of conversion, rights upon
liquidation, and other preferences are subject to determination by the Board of
Directors. As of December 31, 2002, no preferred stock had been issued.

The Company's Board of Directors has authorized the Company to repurchase shares
of its common stock through open market purchases or privately negotiated
transactions. Since 1995, the Company has repurchased an aggregate 1,727,378
shares related to these authorizations. The shares are held by the Company and
accounted for using the cost method. The Company is authorized to purchase up to
47,622 additional shares as of December 31, 2002.

NOTE 10. INCOME TAXES

The Company's operations are only taxed under domestic jurisdictions.

The provision for income taxes is summarized as follows:

The provision for income taxes differs from the amount computed by applying the
federal statutory rates for the following reasons:

42

Deferred tax assets (liabilities) are comprised of the following at December 31,
2002 and 2001:

NOTE 11. EMPLOYEE BENEFIT PLANS

The Company maintains a Retirement Savings Plan (the 401(k) Plan) for its
employees, which allows participants to make contributions by salary reduction
pursuant to Section 401(k) of the Internal Revenue Code. The Company's
contributions to the 401(k) Plan are discretionary. Employees vest immediately
in their contributions and vest in the Company's contributions ratably over five
years. The Company accrued contributions of $55,000, $150,000, and $80,000 to
the 401(k) Plan for the years ended December 31, 2002, 2001, and 2000,
respectively.

NOTE 12. COMMITMENTS AND CONTINGENCIES

On February 1, 1999, the Company acquired substantially all of the assets of
General Analysis Corporation (GAC). GAC is a supplier of beverage monitors used
to measure dissolved Brix (sugar), diet syrup, and carbon dioxide in beverage
streams. Assets acquired also included air and gas monitors that are used by the
chiller/refrigerant industry for the rapid detection of low-level refrigerant
leaks. The Company acquired GAC for $259,459 in cash and the assumption of
approximately $1,100,000 in liabilities. In addition, the Company may be
obligated to make earn-out payments to the former owner of GAC based upon the
achievement of potential future revenue targets. The earn-out provision is based
upon a percentage of equipment sales, as defined in the purchase agreement, in
excess of certain thresholds through 2003. The sales thresholds approximate
$1,000,000 for 1999 and increase ratably each year to a total sales threshold of
at least $5,000,000 in 2003. No earn-out payments were earned for the years
ended December 31, 2002, 2001, or 2000. Any earn-out payments will be recorded
as an adjustment to the purchase price of the acquisition because the earn-out
payments are based upon the future performance of the Company and not upon
continued employment of the former owners. As of December 31, 2002, the maximum
aggregate amount of the potential earn-out payments is approximately $3,500,000.

The Company has an agreement with the former owner of Floyd Associates, Inc. to
pay a royalty equal to 5% of the net revenue earned from certain microwave-based
products up to a maximum amount of $1,182,500. The contingent liability arose as
a result of the acquisition of Floyd in 1994. No minimum payments are required
in the agreement. The Company recognized royalty expense related to this
agreement of $24,249, $34,860, and $41,764 in 2002, 2001, and 2000,
respectively.

43

The Company leases approximately 20,000 sq.ft. of office, engineering,
laboratory, production, and warehouse space in Pelham, Alabama, a suburb of
Birmingham, under a lease expiring in October 2006. The Company also leases 500
sq. ft of office space in Edgewood, Maryland, which can be automatically renewed
annually up to three years. Rental expense recognized in 2002, 2001, and 2000,
was $201,220, $150,000, and $157,000, respectively. Future minimum rental
payments under these leases for each year of the next five successive years are
$192,904, $193,093, $188,785, $171,050, and $-0-.

NOTE 13. SEGMENT DATA

The Company adopted Statement of Financial Accounting Standards No. 131 (FAS
131), Disclosures about Segments of an Enterprise and Related Information. FAS
131 designates the internal reporting that is used by management for making
operating decisions and assessing performance as the source of the Company's
reportable segments. FAS 131 also requires disclosure about products and
sources, geographic areas and major customers. The Company operates its business
as a single segment.

Revenues related to operations in the U.S. and foreign countries for the years
ended December 31, 2002, 2001, and 2000, are presented below. The basis for
attributing revenues from external customers to individual countries is based
upon locations to which the product is shipped. Long-lived assets related to
continuing operations in the U.S. and foreign countries as of the years ended
December 31, 2002, 2001, and 2000, are as follows:

One customer accounted for approximately 10% of revenues in 2002, 12% of
revenues in 2001, and no single customer accounted for more than 10% of revenues
in 2000. Sales to federal, state, and municipal governments accounted for 17% of
total revenues in 2002, 13% of total revenues in 2001, and 31% of total revenues
in 2000.

NOTE 14. QUARTERLY INFORMATION (UNAUDITED)

Quarterly financial information for 2002 and 2001 is summarized as follows:

44

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

(a) Previous independent accountants

(i) On October 29, 2002, O. I. Corporation dismissed
PricewaterhouseCoopers LLP as its independent accountants. The Registrant's
Audit Committee and Board of Directors participated in and approved the decision
to change independent accountants.

(ii) The reports of PricewaterhouseCoopers LLP on the financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified as to audit scope or accounting
principle.

(iii) In connection with the audits for the two most recent fiscal
years and through October 29, 2002, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP
would have caused them to make reference thereto in its report on the financial
statements for such years.

(iv) During the two most recent fiscal years and through October 29,
2002, there have been no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)) except as noted in the following paragraph.

In February 2002, PricewaterhouseCoopers LLP reported a material
weakness in internal controls related to the timeliness of bank
reconciliations performed for the period April 1, 2001 through December
31, 2001. During this period, the Registrant had significant turnover
in personnel with responsibility for those procedures and fell behind
the timely completion of certain routine procedures with respect to
bank reconciliations. However, prior to the completion of the audit,
those procedures were completed. In the report to the Audit Committee,
PricewaterhouseCoopers LLP reported the bank reconciliations were
completed for the year ended December 31, 2001 and were reviewed in
connection with the year-end audit procedures. The Registrant does not
believe that any of the adjustments resulting from the bank
reconciliation process were material to any of the interim financial
statements.

(v) PricewaterhouseCoopers LLP has furnished the Registrant with a
letter addressed to the SEC stating that it agrees with the above statements.

(b) New independent accountants

(i) The Registrant engaged Grant Thornton LLP as its new independent
accountants as of October 29, 2002. During the two most recent fiscal years and
through October 29, 2002, the Registrant has not consulted with Grant Thornton
LLP regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Registrant's financial statements, and neither a
written report was provided to the Registrant or oral advice was provided that
Grant Thornton LLP concluded was an important factor considered by the
Registrant in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

45

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information relating to the identification, business experience, and
directorships of each director and nominee for director of the Company, required
by Item 401 of Regulation S-K and presented in the section entitled "Election of
Directors-Nominees for Board of Directors" of the Company's Proxy Statement for
the annual meeting of shareholders on May 9, 2003 (the "Proxy Statement"), is
hereby incorporated by reference. See Item 1 for information relating to the
identification and business experience of the Company's executive officers. The
information relating to persons subject to Section 16 of the Securities Exchange
Act of 1934 and the timeliness with which they have filed Forms 3, 4, and 5,
required by Item 405 of Regulation S-K and presented in the section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" of the Proxy
Statement, is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information relating to the cash compensation of directors and officers,
required by Item 402 of Regulation S-K and presented in the section entitled
"Election of Directors-Compensation of Directors" and "Election of
Directors-Compensation of Executive Officers" of the Company's Proxy Statement
for the annual meeting of shareholders on May 9, 2003, is incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information relating to security ownership required by Item 403 of
Regulation S-K, which is presented in the section entitled "Security Ownership
of Certain Beneficial Owners and Management" of the Company's Proxy Statement
for the annual meeting of shareholders on May 9, 2003, is incorporated herein by
reference.

On February 19, 2003, a 13-D was filed by Farnam Street Partners, a Minnesota
Limited Partnership, stating that they owned 185,641 shares, or 6.7% of the
Company's shares. The 13-D states "the purchase is for investment only."

EQUITY COMPENSATION PLANS:

All existing equity compensation plans have been approved by security holders.

(1) The 1993 Incentive Stock Option Plan was in effect on December 31, but
expired on January 1, 2003. At such time, 90,866 shares expired ungranted.
Those securities are no longer available for issuance.

(2) The 2003 Incentive Compensation Plan became effective on January 1, 2003.
No shares had been issued under this plan as of December 31, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information relating to relationships and transactions required by Item 404
of Regulation S-K, which is presented in the section entitled, "Election of
Directors - Executive Compensation - Certain Transactions,

46

Employment Contracts, Termination of Employment and Change-in-Control
Arrangements" of the Company's Proxy Statement for the annual meeting of
shareholders on May 9, 2003, is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Within the 90-day period
prior to the filing of this report, an evaluation was carried out under the
supervision and with the participation of the Company's management, including
the chief executive officer and chief financial officer, of the effectiveness of
the Company's disclosure controls and procedures. Based on that evaluation, the
chief executive and financial officers have concluded that the Company's
disclosure controls and procedures are effective. Subsequent to the date of
their evaluation, there have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls.

The Company's management, including the CEO and CFO, does not expect that our
disclosure controls and procedures or our internal controls will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Consolidated Financial Statements of O. I. Corporation and its
subsidiary that are included in Part II, Item 8:

(a) 2. Financial Statement Schedules required to be filed by Item 8 of this
Form:

All schedules are omitted as they are not required, or are not
applicable, or the required information is included in the financial
statements or notes thereto.

(a) 3. Exhibits

3.1 Articles of Incorporation of the Company.

47

3.2 Bylaws of the Company.

*10.1 Amended and Restated 1987 Stock Option and SAR Plan (filed as
Exhibit 4.3 to the Company's Registration Statement on Form
S-8 (No. 33-24505) and incorporated herein by reference).

*10.2 Employee Stock Purchase Plan (filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (No. 33-62209)
and incorporated herein by reference).

*10.3 Employment Agreement between the Company and William W. Botts
(filed as Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 and incorporated
herein by reference).

*10.4 Value-Added Reseller Agreement between the Company and
Hewlett-Packard Company (filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).

*10.5 1993 Incentive Compensation Plan (filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference).

10.6 Registration Rights Agreement among O. I. Corporation and the
former shareholders of CMS Research Corporation dated January
4, 1994 (filed as Exhibit 10.8 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).

*10.7 2003 Incentive Compensation Plan (filed as Exhibit A to the
Company's Proxy Statement dated April 5, 2002, and
incorporated herein by reference).

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of Grant Thornton LLP.

99.1 The O. I. Corporation definitive Proxy Statement, dated April
4, 2003, is incorporated by reference as an Exhibit hereto for
the information required by the Securities and Exchange
Commission, and, except for those portions of such definitive
proxy statement specifically incorporated by reference
elsewhere herein, such definitive proxy statement is deemed
not to be filed as a part of this report.

99.2 Certifications of Chief Executive Officer.

99.3 Certifications of Chief Financial Officer.

* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K.

Form 8-K, Change in Registrant's Certifying Accountants was
filed November 1, 2002.

48

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

O. I. CORPORATION

/s/ William W. Botts
---------------------------
Date: March 29, 2003 By: William W. Botts
------------------ President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:

49

CERTIFICATIONS

I, William W. Botts, certify that:

1. I have reviewed this annual report on Form 10-K of O.I. Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 29, 2003 /s/ William W. Botts
----------------------------------
William W. Botts, Chairman of the
Board of Directors, President, and
Chief Executive Officer
(Principal Executive Officer)

50

CERTIFICATIONS

I, Juan M. Diaz, certify that:

1. I have reviewed this annual report on Form 10-K of O.I. Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 29, 2003 /s/ Juan M. Diaz
-----------------------------
Juan M. Diaz
Corporate Controller
(Principal Financial Officer)

51

INDEX TO EXHIBITS

- ----------
* Management contract or compensatory plan or arrangement.